[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Rules and Regulations]
[Pages 67598-67724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22964]
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Vol. 81
Friday,
No. 190
September 30, 2016
Part III
Book 2 of 2 Books
Pages 67597-67900
Department of Labor
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29 CFR Part 13
Establishing Paid Sick Leave for Federal Contractors; Final Rule
Federal Register / Vol. 81 , No. 190 / Friday, September 30, 2016 /
Rules and Regulations
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Part 13
RIN 1235-AA13
Establishing Paid Sick Leave for Federal Contractors
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule.
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SUMMARY: This Final Rule issues regulations to implement Executive
Order 13706, Establishing Paid Sick Leave for Federal Contractors,
signed by President Barack Obama on September 7, 2015. Executive Order
13706 requires certain parties that contract with the Federal
Government to provide their employees with up to 7 days (56 hours) of
paid sick leave annually, including paid leave allowing for family
care; it explains that providing access to paid sick leave will improve
the health and performance of employees of Federal contractors and
bring their benefits packages in line with model employers, ensuring
that Federal contractors remain competitive employers and generating
savings and quality improvements that will lead to improved economy and
efficiency in Government procurement. The Order directs the Secretary
of Labor to issue regulations to implement its requirements by
September 30, 2016. This Final Rule defines terms used in the
regulatory text, describes the categories of contracts and employees
the Order covers and excludes from coverage, sets forth requirements
and restrictions governing the accrual and use of paid sick leave, and
prohibits interference with or discrimination for the exercise of
rights under the Executive Order. It also describes the obligations of
contracting agencies, the Department of Labor, and contractors under
the Executive Order, and it establishes the standards and procedures
for complaints, investigations, remedies, and administrative
enforcement proceedings related to alleged violations of the Order. As
required by the Order and to the extent practicable, the Final Rule
incorporates existing definitions, procedures, remedies, and
enforcement processes under the Fair Labor Standards Act, the Service
Contract Act, the Davis-Bacon Act, the Family and Medical Leave Act,
the Violence Against Women Act, and Executive Order 13658, Establishing
a Minimum Wage for Contractors.
DATES: Effective date: This Final Rule is effective on November 29,
2016.
Applicability date: For procurement contracts subject to the
Federal Acquisition Regulation and Executive Order 13706, this Final
Rule is applicable only after the effective date of regulations to be
issued by the Federal Acquisition Regulatory Council. The Department of
Labor will publish a document in the Federal Register to announce the
applicability date for such contracts.
FOR FURTHER INFORMATION CONTACT: Robert Waterman, Compliance
Specialist, Wage and Hour Division, U.S. Department of Labor, Room S-
3510, 200 Constitution Avenue NW., Washington, DC 20210; telephone:
(202) 693-0406 (this is not a toll-free number). Copies of this Final
Rule may be obtained in alternative formats (large print, Braille,
audio tape or disc), upon request, by calling (202) 693-0675 (this is
not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-
5627 to obtain information or request materials in alternative formats.
Questions of interpretation and/or enforcement of the agency's
regulations may be directed to the nearest Wage and Hour Division (WHD)
district office. Locate the nearest office by calling the WHD's toll
free help line at (866) 4US-WAGE ((866) 487-9243) between 8 a.m. and 5
p.m. in your local time zone, or log onto the WHD's Web site for a
nationwide listing of WHD district and area offices at http://www.dol.gov/whd/america2.htm.
SUPPLEMENTARY INFORMATION:
I. Executive Order 13706 Requirements and Background
On September 7, 2015, President Barack Obama signed Executive Order
13706, Establishing Paid Sick Leave for Federal Contractors (the
Executive Order or the Order). 80 FR 54697.
Section 1 of Executive Order 13706 explains that the Order seeks to
increase efficiency and cost savings in the work performed by parties
that contract with the Federal Government by ensuring that employees on
those contracts can earn up to 7 days or more of paid sick leave
annually, including paid leave allowing for family care. 80 FR 54697.
The Order states that providing access to paid sick leave will improve
the health and performance of employees of Federal contractors and
bring benefits packages at Federal contractors in line with model
employers, ensuring that they remain competitive employers in the
search for dedicated and talented employees. Id. The Order further
states that these savings and quality improvements will lead to
improved economy and efficiency in Government procurement. Id. Section
2 of the Executive Order establishes paid sick leave for Federal
contractors and subcontractors. 80 FR 54697. Section 2(a) provides that
executive departments and agencies (agencies) shall, to the extent
permitted by law, ensure that new contracts, contract-like instruments,
and solicitations (collectively referred to as ``contracts''), as
described in section 6 of the Order, include a clause, which the
contractor and any subcontractors shall incorporate into lower-tier
subcontracts, specifying, as a condition of payment, that all
employees, in the performance of the contract or any subcontract
thereunder, shall earn not less than 1 hour of paid sick leave for
every 30 hours worked. Id. Section 2(b) prohibits a contractor from
limiting the total accrual of paid sick leave per calendar year, or at
any point, at less than 56 hours. Id.
Section 2(c) explains that paid sick leave earned under the Order
may be used by an employee for an absence resulting from: (i) Physical
or mental illness, injury, or medical condition; (ii) obtaining
diagnosis, care, or preventive care from a health care provider; (iii)
caring for a child, a parent, a spouse, a domestic partner, or any
other individual related by blood or affinity whose close association
with the employee is the equivalent of a family relationship who has
any of the conditions or needs for diagnosis, care, or preventive care
described in (i) or (ii) or is otherwise in need of care; or (iv)
domestic violence, sexual assault, or stalking, if the time absent from
work is for the purposes described in (i) or (ii), to obtain additional
counseling, to seek relocation, to seek assistance from a victim
services organization, or take related legal action, including
preparation for or participation in any related civil or criminal legal
proceeding, or to assist an individual related to the employee as
described in (iii) in engaging in any of these activities. 80 FR 54697.
Section 2(d) provides that paid sick leave shall carry over from
one year to the next and shall be reinstated for employees rehired by a
covered contractor within 12 months after a job separation. Id. Under
section 2(e), the use of paid sick leave cannot be made contingent on
the requesting employee finding a replacement to cover any work time to
be missed. 80 FR 54698. Section 2(f) provides that the paid sick leave
required by the Order is in addition to a contractor's obligations
under the Service Contract Act and Davis-Bacon Act, and contractors may
not receive credit toward their prevailing wage or
[[Page 67599]]
fringe benefit obligations under those Acts for any paid sick leave
provided in satisfaction of the Order's requirements. Id.
Section 2(g) provides that an employer's existing paid sick leave
policy provided in addition to the fulfillment of Service Contract Act
or Davis-Bacon Act obligations, if applicable, and made available to
all covered employees will satisfy the requirements of the Executive
Order if the amount of paid leave is sufficient to meet the
requirements of section 2 and if it may be used for the same purposes
and under the same conditions described in the Executive Order. Id.
Section 2(h) of the Order establishes that paid sick leave shall be
provided upon the oral or written request of an employee that includes
the expected duration of the leave, and is made at least 7 calendar
days in advance where the need for the leave is foreseeable, and in
other cases as soon as is practicable. Id.
Section 2(i) addresses when a contractor may require employees to
provide certification or documentation regarding the use of leave. 80
FR 54698. It provides that a contractor may only require certification
issued by a health care provider for paid sick leave used for the
purposes listed in sections 2(c)(i), (c)(ii), or (c)(iii) for employee
absences of 3 or more consecutive workdays, to be provided no later
than 30 days from the first day of the leave. Id. It further provides
that if 3 or more consecutive days of paid sick leave is used for the
purposes listed in section 2(c)(iv), documentation may be required to
be provided from an appropriate individual or organization with the
minimum necessary information establishing a need for the employee to
be absent from work. Id. The Executive Order notes that the contractor
shall not disclose any verification information and shall maintain
confidentiality about domestic abuse, sexual assault, or stalking,
unless the employee consents or when disclosure is required by law. Id.
Section 2(j) states that nothing in the Order shall require a
covered contractor to make a financial payment to an employee upon a
separation from employment for unused accrued sick leave. 80 FR 54698.
Section 2(j) further notes, however, that unused leave is subject to
reinstatement as prescribed in section 2(d). Id.
Section 2(k) prohibits a covered contractor from interfering with
or in any other manner discriminating against an employee for taking,
or attempting to take, paid sick leave as provided for under the Order,
or in any manner asserting, or assisting any other employee in
asserting, any right or claim related to the Order. Id.
Section 2(l) states that nothing in the Order shall excuse
noncompliance with or supersede any applicable Federal or State law,
any applicable law or municipal ordinance, or a collective bargaining
agreement requiring greater paid sick leave or leave rights than those
established under the Order. Id.
Section 3(a) of the Executive Order provides that the Secretary of
Labor (Secretary) shall issue such regulations by September 30, 2016,
as are deemed necessary and appropriate to carry out the Order, to the
extent permitted by law and consistent with the requirements of 40
U.S.C. 121, including providing exclusions from the requirements set
forth in the Order where appropriate; defining terms used in the Order;
and requiring contractors to make, keep, and preserve such employee
records as the Secretary deems necessary and appropriate for the
enforcement of the provisions of the Order or the regulations
thereunder. 80 FR 54698. It also requires that, to the extent permitted
by law, within 60 days of the Secretary issuing such regulations, the
Federal Acquisition Regulatory Council (FARC) shall issue regulations
in the Federal Acquisition Regulation (FAR) to provide for inclusion in
Federal procurement solicitations and contracts subject to the
Executive Order the contract clause described in section 2(a) of the
Order. Id.
Additionally, section 3(b) states that within 60 days of the
Secretary issuing regulations pursuant to the Order, agencies shall
take steps, to the extent permitted by law, to exercise any applicable
authority to ensure that contracts or contract-like instruments for
concessions and contracts entered into with the Federal Government in
connection with Federal property or lands and related to offering
services for Federal employees, their dependents, or the general
public, entered into after January 1, 2017, consistent with the
effective date of such agency action, comply with the requirements set
forth in section 2 of the Order. 80 FR 54699.
Section 3(c) specifies that any regulations issued pursuant to
section 3 of the Order should, to the extent practicable and consistent
with section 7 of the Order, incorporate existing definitions,
procedures, remedies, and enforcement processes under the Fair Labor
Standards Act, 29 U.S.C. 201 et seq. (FLSA); the McNamara-O'Hara
Service Contract Act, 41 U.S.C. 6701 et seq. (SCA); the Davis-Bacon
Act, 40 U.S.C. 3141 et seq. (DBA); the Family and Medical Leave Act, 29
U.S.C. 2601 et seq. (FMLA); the Violence Against Women Act of 1994, 42
U.S.C. 13925 et seq. (VAWA); and Executive Order 13658, Establishing a
Minimum Wage for Contractors, 79 FR 9851 (Feb. 20, 2014) (Executive
Order 13658 or Minimum Wage Executive Order). Id.
Section 4(a) of the Executive Order grants authority to the
Secretary to investigate potential violations of and obtain compliance
with the Order, including the prohibitions on interference and
discrimination in section 2(k) of the Order. 80 FR 54699. Section 4(b)
further explains that the Executive Order creates no rights under the
Contract Disputes Act, and disputes regarding whether a contractor has
provided employees with paid sick leave prescribed by the Order, to the
extent permitted by law, shall be disposed of only as provided by the
Secretary in regulations issued pursuant to the Order. Id.
Section 5 of the Executive Order establishes that if any provision
of the Order, or applying such provision to any person or circumstance,
is held to be invalid, the remainder of the Order and the application
of the provisions of such to any person or circumstances shall not be
affected thereby. Id.
Section 6(a) of the Executive Order provides that nothing in the
Order shall be construed to impair or otherwise affect (i) the
authority granted by law to an executive department, agency, or the
head thereof; or (ii) the functions of the Director of the Office of
Management and Budget (OMB) relating to budgetary, administrative, or
legislative proposals. 80 FR 54699. Section 6(b) states that the Order
is to be implemented consistent with applicable law and subject to the
availability of appropriations. Id. Section 6(c) explains that the
Order is not intended to, and does not, create any right or benefit,
substantive or procedural, enforceable at law or in equity by any party
against the United States, its departments, agencies, or entities, its
officers, employees, or agents, or any other person. Id.
Section 6(d) of the Executive Order establishes that the Order
shall apply only to a new contract or contract-like instrument, as
defined by the Secretary in the regulations issued pursuant to section
3(a) of the Order, if: (i) (A) It is a procurement contract for
services or construction; (B) it is a contract or contract-like
instrument for services covered by the Service Contract Act; (C) it is
a contract or contract-like instrument for concessions, including any
concessions contract excluded by Department of Labor (the Department)
regulations at 29 CFR 4.133(b); or (D) it
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is a contract or contract-like instrument entered into with the Federal
Government in connection with Federal property or lands and related to
offering services for Federal employees, their dependents, or the
general public; and (ii) the wages of employees under such contract or
contract-like instrument are governed by the DBA, SCA, or FLSA,
including employees who qualify for an exemption from the FLSA's
minimum wage and overtime provisions. 80 FR 54699.
Section 6(e) states that, for contracts or contract-like
instruments covered by the SCA or DBA, the Order shall apply only to
contracts or contract-like instruments at the thresholds specified in
those statutes. 80 FR 54699-700. Additionally, Section 6(e) provides
that for procurement contracts in which employees' wages are governed
by the FLSA, the Order shall apply only to contracts or contract-like
instruments that exceed the micro-purchase threshold, as defined in 41
U.S.C. 1902(a), unless expressly made subject to the Order pursuant to
regulations or actions taken under section 3 of the Order. 80 FR 54700.
Section 6(f) specifies that the Order shall not apply to grants;
contracts and agreements with and grants to Indian Tribes under the
Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638), as amended; or any contracts or contract-like instruments
expressly excluded by the regulations issued pursuant to section 3(a)
of the Order. Id. Section 6(g) strongly encourages independent agencies
to comply with the Order's requirements. Id.
Section 7(a) of the Executive Order provides that the Order is
effective immediately and shall apply to covered contracts where the
solicitation for such contract has been issued, or the contract has
been awarded outside the solicitation process, on or after: (i) January
1, 2017, consistent with the effective date for the action taken by the
FARC pursuant to section 3(a) of the Order; or (ii) January 1, 2017,
for contracts where an agency action is taken pursuant to section 3(b)
of the Order, consistent with the effective date for such action. 80 FR
54700. Section 7(b) specifies that the Order shall not apply to
contracts or contract-like instruments that are awarded, or entered
into pursuant to solicitations issued, on or before the effective date
for the relevant action taken pursuant to section 3 of the Order. Id.
II. Discussion of Final Rule
A. Legal Authority
The President issued Executive Order 13706 pursuant to his
authority under ``the Constitution and the laws of the United States of
America,'' expressly including 40 U.S.C. 121, a provision of the
Federal Property and Administrative Services Act (Procurement Act). 80
FR 54697. The Procurement Act authorizes the President to ``prescribe
policies and directives that [the President] considers necessary to
carry out'' the statutory purposes of ensuring ``economical and
efficient'' government procurement and administration of government
property. 40 U.S.C. 101, 121(a). Executive Order 13706 delegates to the
Secretary the authority to issue regulations ``deemed necessary and
appropriate to carry out this order.'' 80 FR 54698. The Secretary has
delegated his authority to promulgate these regulations to the
Administrator of the WHD. Secretary's Order 01-2014 (Dec. 19, 2014), 79
FR 77527 (published Dec. 24, 2014).
B. Comments Received
On February 25, 2016, the Department published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register, inviting public comments on
a proposal to implement the provisions of Executive Order 13706, which
were to be submitted by March 28, 2016. See 81 FR 9592. On March 14,
2016, the Department extended the period for submitting written
comments until April 12, 2016. See 81 FR 13306.
More than 35,000 individuals and entities commented on the
Department's NPRM. Comments were received from a variety of interested
stakeholders, such as labor organizations; contractors and contractor
associations; worker advocates; advocacy groups focused on issues
affecting women, children, seniors, and the LGBT community; Members of
Congress; local government agencies; small businesses; and workers. The
vast majority of comments received came from individuals who submitted
materially identical comments through interested organizations. For
example, 9,025 individuals submitted essentially identical comments in
support of, or joined, a comment submitted by the National Partnership
for Women & Families (National Partnership) in favor of the rule, and
Organizing for Action submitted a comment in support of the rule signed
by 20,853 individuals.
The Department received many comments, such as those submitted by
the Center for American Progress (CAP), Jobs With Justice, the Service
Employees International Union (SEIU), the American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO), the National
Women's Law Center (NWLC), A Better Balance, North America's Building
Trades Unions (Building Trades), the National Employment Law Project
(NELP), Pride at Work, The Leadership Conference on Civil and Human
Rights, Lambda Legal, Demos, the Center for Law and Social Policy
(CLASP), and 73 U.S. Senators and Representatives expressing support
for establishing paid sick leave for employees of Federal contractors.
For instance, the AFL-CIO agreed with the Order's policy rationale that
providing access to paid sick leave improves the health and performance
of Federal contractor employees, and the Leadership Conference on Civil
and Human Rights wrote that providing paid sick leave means fewer
employees will be forced to make difficult choices between their jobs
and their health or the health of their families.
The Department also received submissions from a number of
commenters, including the U.S. Chamber of Commerce and the
International Franchise Association (Chamber/IFA), Associated General
Contractors of America (AGC), the Professional Services Council (PSC),
the Equal Employment Advisory Council (EEAC), and Associated Builders
and Contractors, Inc. (ABC), expressing opposition to the Order, many
describing its requirements as burdensome for contractors. Some of
these commenters also questioned the President's authority to issue the
Order, which is a subject outside the purview of this rulemaking.
Many commenters expressed reactions to, offered suggestions
regarding, or posed questions about specific provisions in the proposed
regulations. The Department will address such comments in the section-
by-section analysis of the Final Rule below.
C. Effective Date
The Department received comments requesting that the effective date
of this Final Rule be delayed. AGC requested that the Final Rule apply
only to contracts resulting from solicitations issued no earlier than
one year after the date of the rule's publication in the Federal
Register; the American Benefits Council asked for a ``grace period'' of
1 year before contractors were responsible for compliance with the
Order; and TrueBlue, Inc. asked that the rule's effective date be 1
year after its publication. The General Contractors Association of
Hawaii, Master Sheet Metal, Inc., and Alan Shintani, Inc. also
requested a delay in the effective date
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beyond January 1, 2017. Because the Order itself specifically
designates a date as of which its requirements apply to covered
contracts, the Department does not believe it is appropriate to
generally delay its effective date. (A specific, temporary exception
from the Order's requirements for employees performing work subject to
the terms of a collective bargaining agreement is discussed in the
section of this preamble addressing Sec. 13.4.) As such, this Final
Rule is effective as indicated in the Dates section above, and shall
apply to covered contracts where the solicitation for such contract has
been issued, or the contract has been awarded outside the solicitation
process, on or after January 1, 2017.
D. Discussion of the Final Rule
After considering all timely and relevant comments received in
response to the February 25, 2016 NPRM, the Department is issuing this
Final Rule to implement the provisions of Executive Order 13706. The
Final Rule, which amends Title 29 of the Code of Federal Regulations
(CFR) by adding part 13, establishes standards and procedures for
implementing and enforcing Executive Order 13706. Subpart A of part 13
addresses general matters, including the purpose and scope of the rule,
sets forth definitions of terms used in part 13, and describes the
types of contracts and employees covered by the Order and part 13 and
excluded from such coverage. It describes the paid sick leave
requirements for contractors established by the Executive Order,
including rules and restrictions regarding the accrual and use of such
leave. It also prohibits interference with the accrual or use of paid
sick leave provided pursuant to the Executive Order or part 13 and
discrimination for the exercise of rights under the Executive Order or
part 13, and it addresses failure to comply with the recordkeeping
requirements of part 13. Finally, subpart A includes a prohibition
against waiver of rights and a new provision regarding multiemployer
plans and other plans, funds, or programs to provide paid sick leave.
Subpart B establishes the obligations of the Federal Government
(specifically, contracting agencies and the Department) under the
Order, and subpart C establishes the obligations of contractors under
the Order, including recordkeeping requirements. Subparts D and E
specify standards and procedures related to alleged violations of the
Order and part 13, including complaint intake, investigations,
remedies, and administrative enforcement proceedings. Appendix A
contains a contract clause to implement Executive Order 13706.
The following section-by-section discussion of this Final Rule
presents the contents of each section in more detail, summarizes and
responds to comments received about specific provisions, and describes
the Final Rule as adopted, including by noting and explaining
modifications from the proposed rule.
Subpart A--General
Subpart A of part 13 summarizes the purpose of the rule, defines
terms used in the rule, describes the types of contracts and employees
covered by and excluded from the rule, and sets forth rules and
restrictions regarding the accrual and use of paid sick leave. Subpart
A also prohibits interference with the accrual or use of the paid sick
leave required by, and discrimination for the exercise of rights under,
the Executive Order or part 13, as well as violations of the
recordkeeping requirements of part 13. Additionally, subpart A includes
a prohibition against waiver of rights and a new provision regarding
multiemployer plans and other plans, funds, or programs to provide paid
sick leave.
Section 13.1 Purpose and Scope
Proposed Sec. 13.1(a) explained that the purpose of the rule is to
implement Executive Order 13706 and reiterated statements from the
Order that the Federal Government's procurement interests in economy
and efficiency are promoted when the Federal Government contracts with
sources that provide paid sick leave to their employees. It explained
that the Order states that providing access to paid sick leave will
improve the productivity of employees by improving their health and
performance and will bring benefits packages offered by Federal
contractors in line with model employers, ensuring they remain
competitive in the search for dedicated and talented employees.
Proposed Sec. 13.1(a) stated that it is for these reasons that the
Executive Order concludes that the provision of paid sick leave under
the Order will generate savings and quality improvements in the work
performed by parties who contract with the Federal Government, thereby
leading to improved economy and efficiency in Government procurement.
The Department believes that, by increasing the quality and efficiency
of services provided to the Federal Government, the Executive Order
will improve the value that taxpayers receive from the Federal
Government's investment. The Department did not receive comments
regarding Sec. 13.1(a) in particular, and, as noted above, comments
questioning the President's authority to issue Executive Order 13706
are outside of the scope of this rulemaking. This provision is
therefore adopted as proposed.
Proposed Sec. 13.1(b) set forth the general position of the
Federal Government that providing access to paid sick leave on Federal
contracts will increase efficiency and cost savings for the Federal
Government, and it explained the general requirement established in
Executive Order 13706 that new contracts with the Federal Government
include a clause, which the contractor and any subcontractors shall
incorporate into lower-tier subcontracts, requiring, as a condition of
payment, that the contractor and any subcontractors provide paid sick
leave to employees in the amount of not less than 1 hour of paid sick
leave for every 30 hours worked on or in connection with covered
contracts. The final sentence of proposed Sec. 13.1(b) also specified
that nothing in Executive Order 13706 or part 13 would excuse
noncompliance with or supersede any applicable Federal or State law,
any applicable law or municipal ordinance, or a collective bargaining
agreement (CBA) requiring greater paid sick leave or leave rights than
those established under the Order or part 13. The Department did not
receive comments regarding Sec. 13.1(b) and adopts the provision
largely as proposed, except for one change that has no substantive
effect: Deletion of the final sentence, because identical language
appears in Sec. 13.5(f)(1).
Proposed Sec. 13.1(c) outlined the scope of the proposed rule and
provided that neither Executive Order 13706 nor part 13 created any
rights under the Contract Disputes Act or created any private right of
action. As noted in the NPRM, the Department does not interpret the
Executive Order as limiting existing rights under the Contract Disputes
Act. Proposed Sec. 13.1(c) also implemented the directive in section
4(b) of the Order that disputes regarding whether a contractor has
provided paid sick leave as prescribed by the Order, to the extent
permitted by law, shall be disposed of only as provided by the
Secretary in regulations issued under the Order. The proposed provision
specified, however, that nothing in the Order or part 13 was intended
to limit or preclude a civil action under the False Claims Act, 31
U.S.C. 3730, or criminal prosecution under 18 U.S.C. 1001. Finally,
this proposed paragraph specified that neither the Order nor part 13
would preclude judicial review of final decisions by the Secretary in
accordance
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with the Administrative Procedure Act, 5 U.S.C. 701 et seq. No
commenters addressed this provision, and the Department adopts it as
proposed.
Section 13.2 Definitions
Proposed Sec. 13.2 defined terms for purposes of part 13. Section
3(c) of the Executive Order instructs that any regulations issued
pursuant to the Order should ``incorporate existing definitions'' under
the FLSA, SCA, DBA, FMLA, VAWA, and Executive Order 13658 ``to the
extent practicable and consistent with section 7 of this order.'' 80 FR
54699. Because of the similarities in language, structure, and intent
of the Minimum Wage Executive Order and Executive Order 13706, many of
the definitions provided in the proposed rule were identical to or
based on definitions promulgated in the Minimum Wage Executive Order
Final Rule, which in turn were largely based on the definitions of
relevant terms set forth in the statutory text or implementing
regulations of the FLSA, SCA, or DBA. In addition, some definitions
were based on definitions published by the FARC in section 2.101 of the
FAR, 48 CFR 2.101, and others were based on definitions set forth in
the Department's regulations implementing Executive Order 13495,
Nondisplacement of Qualified Workers Under Service Contracts (Executive
Order 13495 or Nondisplacement Executive Order), at 29 CFR 9.2. 79 FR
60637. Definitions in the proposed rule that were relevant because of
provisions of Executive Order 13706 that do not appear in Executive
Order 13658 were largely based on definitions set forth in the
statutory text or implementing regulations of the FMLA or the VAWA, as
well as regulations issued by the U.S. Office of Personnel Management
(OPM) at 5 CFR part 630, subparts B and D, which govern the accrual and
use of sick leave by employees of the Federal Government.
As explained in the NPRM, the definitions discussed below will
govern the implementation and enforcement of Executive Order 13706.
Nothing in this Final Rule is intended to alter the meaning of or to be
interpreted inconsistently with the definitions set forth in section
2.101 of the FAR for purposes of that regulation.
The Department proposed to define accrual year to mean the 12-month
period during which a contractor may limit an employee's accrual of
paid sick leave to no less than 56 hours. No commenters suggested
revising this definition, and it is adopted as proposed.
The Department proposed to define the term Administrative Review
Board as the Administrative Review Board within the U.S. Department of
Labor. The Department received no comments addressing this definition,
and it is adopted as proposed.
The Department proposed to define the term Administrator to mean
the Administrator of the Wage and Hour Division and to include any
official of the Wage and Hour Division authorized to perform any of the
functions of the Administrator under part 13. The Department received
no comments regarding this definition and adopts it as proposed.
The Department proposed to define as soon as is practicable to mean
as soon as both possible and practical, taking into account all of the
facts and circumstances of the individual case. This definition was
derived from the definition of ``as soon as practicable'' in the FMLA
regulations. 29 CFR 825.302(b). Although the Department received
comments regarding the application of this term, as described in the
discussion of Sec. 13.5(d) below, the Department did not receive
comments requesting changes to this definition and therefore implements
it without modification.
The Department proposed to define certification issued by a health
care provider as any type of written document created or signed by a
health care provider (or by a representative of the health care
provider) that contains information verifying the existence of the
physical or mental illness, injury, medical condition, or need for
diagnosis, care, or preventive care or other need for care referred to
in proposed Sec. 13.5(c)(1)(i), (ii), or (iii). The proposed
definition allowed employees to provide as certification a greater
range of documents than would suffice to demonstrate the existence of a
serious health condition for purposes of the FMLA. See 29 CFR 825.305,
825.306. For example, under the proposal, a note from a hospital nurse
stating that an employee needed surgery and would require at least 3
days to recover before returning to work would meet the definition, as
would a note from an employee's parent's doctor stating that the parent
needs daily assistance with tasks such as dressing and eating. EEAC
commented that employees should be required to provide as much
information to certify the use of paid sick leave as is necessary to
certify the use of FMLA leave; on the other hand, the Center for
WorkLife Law at the University of California, Hastings College of Law
(Center for WorkLife Law) commented that the Department should require
no specificity in the certification beyond the fact that a medical or
health condition exists, because such a statement is sufficient to
prevent employee abuse of leave and would avoid inviting the contractor
to inappropriately evaluate whether a particular condition justifies
the use of paid sick leave. The Department declines to adopt either
suggestion. With respect to EEAC's comment, the Department notes that
the reasons for which an employee may use FMLA leave are significantly
more limited than the permissible uses of paid sick leave under the
Order and part 13, and it is therefore logical that the information
required to justify the use of FMLA leave correspondingly reflects a
higher threshold than is called for in using paid sick leave. But
neither does the Department agree that a simple statement that an
employee (or an employee's family member) has a medical or health issue
would constitute the type of certification contemplated in the
Executive Order. As the examples above indicate, the Department
believes that great specificity regarding the medical or health issue
is not required; a health care provider's note referring to surgery
need not explain what condition the surgery treated or the specifics of
the procedure, and a note from a doctor regarding a physical or mental
condition (such as a broken leg or dementia) that causes a need for
caretaking need not provide specific details about the parent's
condition or the specific tasks with which assistance is required.
In the discussion of this definition in the NPRM, the Department
noted that a contractor could not require that an employee or the
individual for whom the employee is caring have seen the health care
provider in person in order to accept the certification. The Department
did not receive comments regarding this interpretation. For purposes of
clarity, it has included language in the final regulatory text making
the point that the health care provider (or representative) need not
have seen the employee or individual in person in order to create a
valid certification.
In the NPRM, the Department proposed to define child to mean (1) a
biological, adopted, step, or foster son or daughter of the employee;
(2) a person who is a legal ward or was a legal ward of the employee
when that individual was a minor or required a legal guardian; (3) a
person for whom the employee stands in loco parentis or stood in loco
parentis when that individual was a minor or required someone to stand
in loco parentis; or (4)
[[Page 67603]]
a child, as described in paragraphs (1) through (3) of the definition,
of an employee's spouse or domestic partner. The NPRM explained that
this definition was adopted from the definition of ``son or daughter''
in the OPM regulations governing leave for Federal employees. 5 CFR
630.201(b). The Department noted that the proposed definition was
deliberately broader than the definition of ``son or daughter'' in the
FMLA, which includes only minor children or adult children ``incapable
of self-care because of a mental or physical disability.'' 29 CFR
825.102. As the Department explained in the NPRM, the terms of the
Executive Order make clear that employees are to be permitted to use
paid sick leave for a broader range of purposes than those for which
they can use FMLA leave, and one such more expansive use is to care for
an employee's child of any age.
EEAC commented that the Department should use as its definition of
``child'' the definition of ``son or daughter'' from the FMLA,
asserting that an employee should not be able to use paid sick leave to
care for adult children who are not incapable of self-care or the child
of a spouse or domestic partner who is not also the employee's child. A
comment from scholars affiliated with the Williams Institute at the
UCLA School of Law, however, specifically supported the definition's
inclusion of a child who is the employee's spouse or domestic partner's
son or daughter but not legally recognized as the employee's child.
Because the Department interprets the list of family members for whom
an employee may use paid sick leave to care in section 2(c)(iii) of the
Order as being deliberately broad and inclusive, see 80 FR 54697
(permitting the use of paid sick leave to care for ``a child, a parent,
a spouse, a domestic partner, or any other individual related by blood
or affinity whose close association with the employee is the equivalent
of a family relationship'')--and in particular because the list so
plainly deviates from the more limited list in the FMLA, see 29 U.S.C.
2612(a)(1)(C) (permitting the use of FMLA leave ``to care for the
spouse, or a son, daughter, or parent, of the employee'')--the
Department adopts the inclusive definition of child as proposed.
The Department proposed a definition of concessions contract or
contract for concessions identical to the definition of those terms in
the Minimum Wage Executive Order Final Rule. See 79 FR 60722 (codified
at 29 CFR 10.2). Specifically, the Department proposed to define the
term as a contract under which the Federal Government grants a right to
use Federal property, including land or facilities, for furnishing
services, and included as examples of such contracts those the
principal purpose of which is to furnish food, lodging, automobile
fuel, souvenirs, newspaper stands, and/or recreational equipment. The
Department noted that the proposed definition was not limited based on
the beneficiary of the services but rather that it encompassed
contracts regardless of whether they are of direct benefit to the
Federal Government, its property, its civilian or military personnel,
or the general public. See 29 CFR 4.133; see also 79 FR 60638. The NPRM
noted that the proposed definition included, but was not limited to,
all concessions contracts excluded by Departmental regulations under
the SCA at 29 CFR 4.133(b). See 79 FR 60638. No commenters addressed
the definition of concessions contract or contract for concessions, and
the Department adopts the definition as proposed.
The Department proposed to define contract and contract-like
instrument collectively for purposes of the Executive Order in the same
manner as it did in the Minimum Wage Executive Order implementing
regulations. See 79 FR 60722 (codified at 29 CFR 10.2). Specifically,
the NPRM defined a contract or contract-like instrument as an agreement
between two or more parties creating obligations that are enforceable
or otherwise recognizable at law. The proposed definition included, but
was not limited to, a mutually binding legal relationship obligating
one party to furnish services (including construction) and another
party to pay for them. The proposed definition of the term contract
broadly included all contracts and any subcontracts of any tier
thereunder, whether negotiated or advertised, including any procurement
actions, lease agreements, cooperative agreements, provider agreements,
intergovernmental service agreements, service agreements, licenses,
permits, or any other type of agreement, regardless of nomenclature,
type, or particular form, and whether entered into verbally or in
writing. The proposed definition of the term contract was interpreted
broadly to include, but not be limited to, any contract that may be
consistent with the definition provided in the FAR or applicable
Federal statutes. The proposed definition further included, but was not
limited to, any contract that may be covered under any Federal
procurement statute. The Department specifically noted in the proposed
definition that contracts may be the result of competitive bidding or
awarded to a single source under applicable authority to do so. The
proposed definition also explained that, in addition to bilateral
instruments, contracts included, but were not limited to, awards and
notices of awards; job orders or task letters issued under basic
ordering agreements; letter contracts; orders, such as purchase orders,
under which the contract becomes effective by written acceptance or
performance; and bilateral contract modifications. The proposed
definition also specified that the term contract included contracts
covered by the SCA, contracts covered by the DBA, concessions contracts
not subject to the SCA, and contracts in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public. As explained in the
Minimum Wage Executive Order rulemaking, the proposed definition of
contract was derived from the definition of the term contract set forth
in Black's Law Dictionary (9th ed. 2009) and section 2.101 of the FAR
(48 CFR 2.101), as well as the descriptions of the term contract that
appear in the SCA's regulations at 29 CFR 4.110-4.111 and 4.130. See 79
FR 60638-41.
The Department's proposal deliberately adopted a broad definition
of this term, but noted that the mere fact that a legal instrument
constitutes a contract would not mean that such contract is subject to
the Executive Order. In order for a contract to be covered by the
Executive Order and part 13, the contract must (1) qualify as a
contract or contract-like instrument; (2) fall within one of the
specifically enumerated types of contracts set forth in section 6(d)(i)
of the Order and Sec. 13.3; and (3) be a new contract. Therefore, the
NPRM explained that, for example, although a cooperative agreement was
a contract under the Department's proposed definition, a cooperative
agreement would not be covered by the Executive Order and part 13
unless it was a new contract and was subject to the SCA or DBA, was a
concessions contract, or was entered into in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public.
The Department did not receive any comments requesting a change to
this proposed definition, and it therefore adopts it as proposed. One
commenter, Bodman PLC, asked for clarification of whether, based on the
broad definition of contract, a financial institution that holds
deposits insured by the Federal Deposit Insurance Corporation or the
National Credit Union Administration would be covered by the Order and
part 13. A contract with the Federal
[[Page 67604]]
Government is not covered by the Order and this rulemaking unless it is
one of the types of covered contracts named in the Order and further
described in Sec. 13.3 and the accompanying explanation in this
preamble. Unless the types of agreements to which the commenter
referred are procurement contracts for construction covered by the DBA,
contracts for services covered by the SCA, contracts for concessions,
or contracts in connection with Federal property or lands and related
to offering services for Federal employees, their dependents, or the
general public, the Order does not cover them. Furthermore, as
explained below, with respect to the fourth category of covered
contracts, the Department does not interpret ``Federal property'' to
encompass money, and therefore purely financial transactions with the
Federal Government are not covered by the Order or part 13.
The Department proposed to define contracting officer based on the
definition used in 29 CFR 10.2, issued pursuant to the Minimum Wage
Executive Order, which in turn was adopted from the definition in
section 2.101 of the FAR. See 79 FR 60641 (citing 48 CFR 2.101). As
proposed, the term meant a representative of an executive department or
agency with the authority to enter into, administer, and/or terminate
contracts and make related determinations and findings. The term also
included certain authorized representatives of the contracting officer
acting within the limits of their authority as delegated by the
contracting officer. The Department received no comments regarding this
definition and adopts it as proposed.
The Department proposed to define contractor to mean any individual
or other legal entity that is awarded a Federal Government contract or
a subcontract under a Federal Government contract. The proposed
definition referred to both a prime contractor and all of its first- or
lower-tier subcontractors on a contract with the Federal Government. It
also included lessors and lessees. The Department noted that the term
employer was used interchangeably with the terms contractor and
subcontractor in part 13. The proposed definition also explained that
the U.S. Government, its agencies, and its instrumentalities are not
considered contractors, subcontractors, employers, or joint employers
for purposes of compliance with the provisions of Executive Order
13706. The proposed definition, which was derived from the definition
adopted in the Minimum Wage Executive Order rulemaking, see 79 FR 60722
(codified at 29 CFR 10.2), incorporated relevant aspects of the
definitions of the term contractor in section 9.403 of the FAR, see 48
CFR 9.403; the SCA regulations at 29 CFR 4.1a(f); and the Department's
regulations implementing the Nondisplacement Executive Order at 29 CFR
9.2. The proposed definition differed from the Minimum Wage Executive
Order only in that it did not refer to employers of employees
performing work on covered Federal contracts whose wages are computed
pursuant to special certificates issued under 29 U.S.C. 214(c). The
Department noted in the NPRM that although such employers would be
contractors for purposes of Executive Order 13706, such a reference was
not called for in the proposed definition because, unlike the Minimum
Wage Executive Order, this Order does not contain any explicit
reference to employees whose wages are computed pursuant to section
14(c) certificates. No commenters addressed this definition, and it is
adopted as proposed.
The Department proposed to define the term Davis-Bacon Act to mean
the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and
its implementing regulations. This definition is adopted as proposed.
The Department proposed to define the term domestic partner to mean
an adult in a committed relationship with another adult. The proposed
definition included both same-sex and opposite-sex relationships. The
Department proposed to further explain that a committed relationship
was one in which the employee and the domestic partner of the employee
are each other's sole domestic partner (and are not married to or
domestic partners with anyone else) and share responsibility for a
significant measure of each other's common welfare and financial
obligations. The proposed definition included, but was not limited to,
any relationship between two individuals of the same or opposite sex
that is granted legal recognition by a State or by the District of
Columbia as a marriage or analogous relationship (including, but not
limited to, a civil union). The proposed definition was adopted from
the definitions of ``domestic partner'' and ``committed relationship''
in the OPM regulations regarding the use of sick leave by Federal
employees. 5 CFR 630.201(b).
The Department received a number of comments, including from Pride
at Work, the Los Angeles LGBT Center, CAP, and Lambda Legal, largely
supporting this proposed definition but also asking that it be
clarified. Specifically, these organizations wrote that they have ``a
concern regarding the requirement that domestic partners share
responsibility for a significant measure of each other's financial
obligations'' because for many couples, only one individual earns an
income that supports both partners, and ``the regulations should be
clear that such couples are not excluded from the definition of
domestic partners or committed relationship solely because only one
partner earns income that they both depend upon.'' The Department did
not intend its proposed definition to imply that only if both members
of a couple earn an income would that couple be considered domestic
partners. Rather, the language regarding sharing responsibility for
financial obligations could refer to a variety of circumstances, such
as but not limited to one member of the couple paying for the housing
and other necessities of the other, the couple having joint bank
accounts, the couple sharing significant expenses, and/or the couple
being jointly responsible for financial obligations such as mortgage or
other loan payments. In other words, rather than calling for any
particular financial arrangement, the financial interdependence clause
of the definition is meant to indicate that the couple's financial
situation reflects that the relationship is a committed one, rather
than, for example, a casual roommate situation. See Final Rule, Absence
and Leave; Definitions of Family Member, Immediate Relative, and
Related Terms, 75 FR 33491, 33493-94 (June 14, 2010) (OPM's discussion
of the term ``committed relationship,'' noting that its definition
``would preclude casual roommates from qualifying as each other's
domestic partner''). Because the Department's language is consistent
with OPM's and does not have the meaning about which the commenters
were concerned, the Department adopts the definition of domestic
partner as proposed.
The Department proposed to define domestic violence as (1) felony
or misdemeanor crimes of violence (including threats or attempts)
committed: (i) by a current or former spouse, domestic partner, or
intimate partner of the victim; (ii) by a person with whom the victim
shares a child in common; (iii) by a person who is cohabitating with or
has cohabitated with the victim as a spouse, domestic partner, or
intimate partner; (iv) by a person similarly situated to a spouse of
the victim under domestic or family violence laws of the jurisdiction
in which the victim resides or the events occurred; or (v) by any other
adult person against a victim who is protected
[[Page 67605]]
from that person's acts under the domestic or family violence laws of
the jurisdiction in which the victim resides or the events occurred.
Under the proposed definition, domestic violence also included (2) any
crime of violence considered to be an act of domestic violence
according to State law. This definition was derived from the VAWA, 42
U.S.C. 13925(a)(8), and its implementing regulations, 28 CFR 90.2(a).
In its comment, the Women's Law Project expressed concern that this
definition only refers to acts that are considered to be domestic
violence for purposes of criminal laws rather than also including acts
that constitute domestic violence for purposes of civil laws, in
particular those allowing for civil protection orders. Because the
Department did not intend for this definition to be narrow or exclude
any subset of victims of acts that a State considers to constitute
domestic violence, it is adopting the definition with the revisions
suggested by the Women's Law Project. Specifically, in the fourth and
fifth lines of the first part of the definition, the Department is
inserting ``civil or criminal'' before ``domestic and family violence
laws,'' and in the second part of the definition, the Department is
replacing ``according to State law'' with ``under the civil or criminal
domestic or family violence laws of the jurisdiction in which the
victim resides or the events occurred,'' the same phrase used in the
first part of the definition.
The Department proposed to define employee similarly to the way the
term worker was used in the Minimum Wage Executive Order rulemaking,
see 79 FR 60723, but with some differences reflecting the differences
in the text of that Executive Order and Executive Order 13706. As
proposed, the term meant any person engaged in performing work on or in
connection with a contract covered by the Executive Order, and whose
wages under such contract are governed by the SCA, DBA, or FLSA,
including employees who qualify for an exemption from the FLSA's
minimum wage and overtime provisions, regardless of the contractual
relationship alleged to exist between the individual and the employer.
Furthermore, the term employee included any person performing work on
or in connection with a covered contract and individually registered in
a bona fide apprenticeship or training program registered with the U.S.
Department of Labor's Employment and Training Administration, Office of
Apprenticeship, or with a State Apprenticeship Agency recognized by the
Office of Apprenticeship.
Much of this proposed definition came directly from section
6(d)(ii) of the Executive Order, and much of it was identical to the
definition of worker in the Minimum Wage Executive Order regulations.
The most significant difference between the proposed definition of
employee and the Minimum Wage Executive Order rulemaking's definition
of worker was the inclusion of employees who qualify for an exemption
from the FLSA's minimum wage and overtime provisions, such as employees
employed in a bona fide executive, administrative, or professional
capacity, as those terms are defined in 29 CFR part 541. Comments
regarding the application of the Order and part 13 to such employees
are addressed below, in the discussion of coverage of employees under
Sec. 13.3; for the reasons explained there, the Department adopts the
relevant portion of this definition as proposed.
The proposed definition also emphasized, as had been explained in
the Minimum Wage Executive Order rulemaking, the well-established
principle under the DBA, SCA, and FLSA that employee coverage does not
depend upon the existence or form of any contractual relationship that
may be alleged to exist between the contractor or subcontractor and
such persons. See 79 FR 60644 (citing 29 U.S.C. 203(d), (e)(1), (g)
(FLSA); 41 U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i)
(DBA)). As reflected in the proposed definition, the Executive Order is
intended to apply to a wide range of employment relationships. Neither
an individual's subjective belief about his or her employment status
nor the existence of a contractual relationship is determinative of
whether an employee is covered by the Executive Order.
EEAC and AGC remarked on the breadth of the proposed rule's
statements about coverage of independent contractors, and AGC, Master
Sheet Metal, Inc., General Contractors Association of Hawaii, and
TrueBlue, Inc. specifically requested clarification that the rule does
not apply to independent contractor owner-operators or sole proprietors
to the extent they are not subject to SCA or DBA prevailing wage
requirements. Although the Department reiterates its statement that
allegations of a contractual relationship or the existence of a
contract are not determinative of whether a worker is an employee or an
independent contractor, it clarifies its statements about the effect of
a worker being properly categorized as an independent contractor here.
Whether a worker is an ``employee'' or an ``independent contractor'' as
those terms are often used in other contexts is not material to whether
that worker is a service employee for purposes of the SCA or a laborer
or mechanic for purposes of the DBA. See, e.g., 29 CFR 4.155 (SCA); 29
CFR 5.5(a)(1)(i) (DBA); In re Igwe, ARB Case No. 07-120, 2009 WL
4324725, at *3-4 (Nov. 25, 2009) (rejecting an argument that ``the
individuals working on the four contracts were not entitled to SCA
prevailing wages and fringe benefits because they were independent
contractors, not employees'' because ``the relevant inquiry is whether
the persons working on the contract come within the SCA definition of
`service employee''' and explaining ``the irrelevance of `contractual
relationship' to that definition''). Because even workers who are
independent contractors may be covered by the SCA and DBA, those
workers, if so covered, are employees for purposes of the Order and
part 13. A worker who is not a service employee for purposes of the SCA
or a laborer or mechanic for purposes of the DBA and who is not an
employee under the FLSA, however, is not covered by the Order or part
13. (The Department notes that an employee who qualifies for an
exemption from the FLSA's minimum wage and overtime requirements is
still an employee rather than an independent contractor; as explained
elsewhere, employees who qualify for such exemptions are covered by the
Order and part 13.) More specifically, owner-operators (such as owner-
operator truck drivers) and sole proprietors are not covered by the
Executive Order and part 13 to the extent they are not entitled to
prevailing wages under the DBA or SCA and are properly classified as
independent contractors whose wages are not governed by the FLSA. The
Department's guidance regarding the classification of workers as
independent contractors under the FLSA is available on the WHD Web
site, http://www.dol.gov/whd.
The proposed definition's inclusion of any person performing work
on or in connection with a covered contract and individually registered
in a bona fide apprenticeship or training program registered with the
Department's Employment and Training Administration, Office of
Apprenticeship, or with a State Apprenticeship Agency recognized by the
Office of Apprenticeship, was similarly in keeping with the Minimum
Wage Executive Order's adoption of
[[Page 67606]]
those provisions from the SCA and DBA regulations. See 79 FR 60644
(citing 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA)). The Department
received no comments regarding this portion of the proposed definition
and has adopted it as proposed.
The Department noted in the NPRM that, because unlike the Minimum
Wage Executive Order, Executive Order 13706 makes no reference to
individuals performing work on or in connection with a covered contract
whose wages are calculated pursuant to special certificates issued
under 29 U.S.C. 214(c), that category of employees was not explicitly
mentioned in the proposed definition. It further explained that such
individuals would nevertheless plainly fall within the definition of
employee for purposes of this rulemaking because their wages are
governed by the FLSA. The AFL-CIO and SEIU supported the Department's
inclusion of such workers, and the Department makes no change to this
implication of the definition.
Finally, the Department has added language to this definition
explaining the meaning of working ``on or in connection with'' a
covered contract. Specifically, the definition now provides that an
employee performs ``on'' a contract if the employee directly performs
the specific services called for by the contract and that an employee
performs ``in connection with'' a contract if the employee's work
activities are necessary to the performance of a contract but are not
the specific services called for by the contract. As noted in the more
detailed discussion below of employee coverage as provided for in Sec.
13.3, these concepts were explained in the NPRM but were not included
in the regulatory text itself.
The Department proposed to define executive departments and
agencies for purposes of this rulemaking by adopting the definition of
that term used in the Minimum Wage Executive Order rulemaking, which
was derived from the definition of executive agency provided in section
2.101 of the FAR, 48 CFR 2.101. 79 FR 60642, 60722 (codified at 29 CFR
10.2). The Department therefore proposed to interpret the Executive
Order to apply to executive departments within the meaning of 5 U.S.C.
101, military departments within the meaning of 5 U.S.C. 102,
independent establishments within the meaning of 5 U.S.C. 104(1), and
wholly owned Government corporations within the meaning of 31 U.S.C.
9101. The Department did not interpret this definition as including the
District of Columbia or any Territory or possession of the United
States.
Bredhoff & Kaiser, PLLC submitted a comment on behalf of the
National Postal Mail Handlers Union urging the Department to ensure
that the Executive Order and part 13 apply to covered contracts with
the U.S. Postal Service. Although the proposed rule did not identify
any particular entities that would or would not have qualified as
executive departments and agencies, its definition of that term
referred to, among other types of entities, independent establishments
within the meaning of 5 U.S.C. 104(1). That statutory provision
expressly excludes the U.S. Postal Service.
The Department agrees with the commenter that the Executive Order,
which contains no indication that the U.S. Postal Service is not among
the governmental entities the contracts of which may be covered, is
best interpreted to apply to covered contracts with the U.S. Postal
Service. The Minimum Wage Executive Order rulemaking did not address
the implications of its adoption of the FAR's definition of executive
departments and agencies, including its reference to independent
establishments within the meaning of 5 U.S.C. 104(1) generally or
coverage of the U.S. Postal Service specifically; there is no
indication in the rulemaking that any commenter asked that the
Department expand coverage to the U.S. Postal Service or that doing so
would have had practical effect. The terms of Executive Order 13706 (as
well as Executive Order 13658) indicate that contracts with the Federal
Government covered by the SCA are covered by the Order, and it is clear
that under the SCA, service contracts with the Federal Government
covered by that Act include contracts with the U.S. Postal Service
unless they are expressly excluded. See, e.g., 41 U.S.C. 6702(b)(7)
(``This chapter does not apply to . . . a contract with the United
States Postal Service, the principal purpose of which is the operation
of postal contract stations.''). It is therefore appropriate to infer
that the Executive Order was intended to apply to covered contracts
with the U.S. Postal Service. Furthermore, the purpose of the Executive
Order--ensuring that employees working on or in connection with covered
contracts have access to paid sick leave--is best served by modifying
the proposed definition to make clear that coverage extends to covered
contracts with the U.S. Postal Service. Accordingly, the Department has
expanded the definition of executive departments and agencies to refer
to independent establishments not only within the meaning of 5 U.S.C.
104(1), but also within the meaning of 39 U.S.C. 201, which establishes
the U.S. Postal Service ``as an independent establishment of the
executive branch of the Government of the United States.''
The Department proposed to define Executive Order 13495 or
Nondisplacement Executive Order to mean Executive Order 13495 of
January 30, 2009, Nondisplacement of Qualified Workers Under Service
Contracts, 74 FR 6103 (Feb. 4, 2009), and its implementing regulations
at 29 CFR part 9. This definition is adopted as proposed.
The Department proposed to define Executive Order 13658 or Minimum
Wage Executive Order to mean Executive Order 13658 of February 12,
2014, Establishing a Minimum Wage for Contractors, 79 FR 9851 (Feb. 20,
2014), and its implementing regulations at 29 CFR part 10. This
definition is adopted as proposed.
The Department proposed to define Fair Labor Standards Act as the
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq.,
and its implementing regulations. This definition is adopted as
proposed.
The Department proposed to define Family and Medical Leave Act as
the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. 2601 et
seq., and its implementing regulations. This definition is adopted as
proposed.
The Department proposed to define family violence, a term used in
the definition of domestic violence, to mean any act or threatened act
of violence, including any forceful detention of an individual that
results or threatens to result in physical injury and is committed by a
person against another individual (including an elderly individual) to
or with whom such person is related by blood, is or was related by
marriage or is or was otherwise legally related, or is or was lawfully
residing. Because the VAWA does not provide a definition of the term,
this definition was adopted from the definition of ``family violence''
in the Family Violence Prevention and Services Act, 42 U.S.C. 10401.
See 42 U.S.C. 10402(4). The Department did not receive any comments
regarding this definition and therefore adopts it as proposed.
Proposed Sec. 13.2 defined Federal Government as an agency or
instrumentality of the United States that enters into a contract
pursuant to authority derived from the Constitution or the laws of the
United States. The proposed definition was identical to that used in
the regulations implementing the Minimum Wage Executive Order. 79 FR
60722 (codified at 29 CFR 10.2). That definition was
[[Page 67607]]
based on the definition of Federal Government set forth in 29 CFR 9.2,
but eliminated the term ``procurement'' from that definition because
Executive Order 13658 applies--as does Executive Order 13706--to both
procurement and non-procurement contracts. 79 FR 60642. Consistent with
the SCA, the term Federal Government under the proposal included
nonappropriated fund instrumentalities under the jurisdiction of the
Armed Forces or of other Federal agencies. See 29 CFR 4.107(a). The
proposed definition provided that for purposes of Executive Order 13706
and part 13, Federal Government did not include the District of
Columbia or any Territory or possession of the United States. As used
in the Order and part 13, the term also did not include any independent
regulatory agency within the meaning of 44 U.S.C. 3502(5) because such
agencies are not required to comply with the Order or part 13.
Bredhoff & Kaiser's comment, discussed above with respect to the
definition of executive departments and agencies, suggested that the
Department adjust the definition of Federal Government to ensure that
this rulemaking applies to covered contracts with the U.S. Postal
Service. The Department believes that the definition of Federal
Government is sufficiently broad that the expansion of the definition
of executive departments and agencies to include the U.S. Postal
Service fulfills the purpose of making clear that the Department
interprets the Order and part 13 to apply to covered contracts with the
U.S. Postal Service. The Department therefore adopts the definition as
proposed.
The Department proposed to define health care provider as any
practitioner who is licensed or certified under Federal or State law to
provide the health-related service in question or any practitioner
recognized by an employer or the employer's group health plan. The term
included, but was not limited to, doctors of medicine or osteopathy,
podiatrists, dentists, psychologists, optometrists, chiropractors,
nurse practitioners, nurse-midwives, clinical social workers, physician
assistants, physical therapists, and Christian Science Practitioners
listed with the First Church of Christ, Scientist in Boston,
Massachusetts. This definition was intended to be broad and inclusive,
and the Department reiterates that the list is not exhaustive. For
example, not only a nurse practitioner, but also a registered nurse or
a licensed practical nurse, would fall under this definition if an
employee sought a service such a practitioner was licensed or certified
to provide. The definition was derived from the definitions of health
care provider in the FMLA regulations, 29 CFR 825.125, and OPM
regulations, 5 CFR 630.201 and 5 CFR 630.1202.
EEAC was opposed to the breadth of this term, specifically
suggesting that referring to ``psychologists'' instead of ``clinical
psychologists'' and failing to limit ``chiropractors'' with the phrase
``treatment consisting of manual manipulation of the spine to correct a
subluxation as demonstrated by X-ray to exist'' was inappropriate.
Because the types of ailments and treatments for which an employee may
use paid sick leave is intended to be broad, the list of practitioners
is illustrative rather than restricting the types of professionals who
fall within the definition, and the definition is already limited to
practitioners licensed or certified under Federal or State law or
recognized by an employer or the employer's group health plan, the
Department does not believe the suggested changes are appropriate.
Accordingly, it adopts the definition as proposed.
The Department proposed to define the term independent agencies as
any independent regulatory agency within the meaning of 44 U.S.C.
3502(5). Section 6(g) of the Executive Order states that
``[i]ndependent agencies are strongly encouraged to comply with the
requirements of this order.'' The Department's proposal interpreted
this provision, as it interpreted an identical provision in the Minimum
Wage Executive Order, to mean that independent agencies are not
required to comply with this Executive Order. See 79 FR 9853; 79 FR
60643. The proposed definition was therefore based on other Executive
Orders that similarly exempt independent regulatory agencies within the
meaning of 44 U.S.C. 3502(5) from the definition of agency or include
language requesting that they comply. See, e.g., Executive Order 13636,
78 FR 11739 (Feb. 12, 2013) (defining agency as any executive
department, military department, Government corporation, Government-
controlled operation, or other establishment in the executive branch of
the Government but excluding independent regulatory agencies as defined
in 44 U.S.C. 3502(5)); Executive Order 13610, 77 FR 28469 (May 10,
2012) (same); Executive Order 12861, 58 FR 48255 (September 11, 1993)
(``Sec. 4 Independent Agencies. All independent regulatory commissions
and agencies are requested to comply with the provisions of this
order.''); Executive Order 12837, 58 FR 8205 (Feb. 10, 1993) (``Sec. 4.
All independent regulatory commissions and agencies are requested to
comply with the provisions of this order.''). The Department received
no comments regarding this definition and adopts it as proposed.
The Department proposed to include in Sec. 13.2 a definition of
individual related by blood or affinity whose close association with
the employee is the equivalent of a family relationship. The Department
proposed to define the term to mean any person with whom the employee
has a significant personal bond that is or is like a family
relationship, regardless of biological or legal relationship. The NPRM
noted that although this term is used in the OPM regulations, see 5 CFR
630.201 (defining ``family member,'' for purposes of Federal employees'
use of leave, to include the term), OPM has not created a regulatory
definition of it; the Department's proposed definition was, however,
derived from OPM's discussion of the term in OPM's 2010 Final Rule, 75
FR 33491. In particular, OPM explained that creating an exhaustive list
of the relationships that meet the definition is not possible, but that
OPM has ``broadly interpreted the phrase to include such relationships
as grandparent and grandchild, brother- and sister-in-law,
fianc[eacute] and fianc[eacute]e, cousin, aunt and uncle, other
relatives not specified in [the list naming a spouse, child, parent,
brother, or sister], and close friend, to the extent that the
connection between the employee and the individual was significant
enough to be regarded as having the closeness of a family relationship
even though the individuals might not be related by blood or formally
in law.'' 75 FR 33492.
The Department explained in the NPRM that it understood the term to
be inclusive of non-nuclear family structures, noting that it could
include, for example, an individual who was a foster child in the same
home in which the employee was a foster child for several years and
with whom the employee has maintained a sibling-like relationship, a
friend of the family in whose home the employee lived while she was in
high school and whom the employee therefore considers to be like a
mother or aunt to her, or an elderly neighbor with whom the employee
has regularly shared meals and to whom the employee has provided unpaid
caregiving assistance for the past 5 years and whom the employee
therefore considers to be like a grandfather to her.
In the NPRM, the Department sought comments regarding its proposed
definition of this term, in particular regarding whether additional
specificity was necessary. Numerous organizations--including but not
limited to Lambda Legal, the National LGBTQ Task Force, Pride at Work,
CAP,
[[Page 67608]]
the Children's Alliance, the Family Equality Council, Equality Maine,
Basic Rights Oregon, CLASP, Demos, A Better Balance, the Working
Families Organization, Caring Across Generations, the Labor Project for
Working Families in partnership with Family Values @ Work, and the
Movement Advancement Project--strongly supported the proposed
definition of this phrase. Many of these commenters noted that many
Americans live in multigenerational households and LGBTQ Americans in
particular often rely on ``families of choice,'' meaning that any
specific limitations inserted into the definition could defeat the
purpose of using the broad term. They also wrote that a broad
definition has been successfully in place with respect to Federal
employees' sick leave for years, indicating that the proposed
definition would not be difficult to implement or likely to be abused.
The New York City (NYC) Department of Consumer Affairs wrote about its
experience enforcing a local paid sick time law and the importance of
capturing, for example, an employee's fianc[eacute] or aunt in the set
of people for whom the employee can take leave to care. The Main Street
Alliance, a coalition of employers, wrote that using a broad definition
alleviated the burden on contractors of determining whether an
employee's relationship fit into some more limited set of
relationships. Other commenters noted that the example included in the
NPRM of the elderly neighbor was useful.
Other commenters, however, did not support the proposed definition.
The American Benefits Council, Seyfarth Shaw LLP, the Chamber/IFA, and
Society for Human Resource Management and the College and University
Professional Association for Human Resources (SHRM/CUPA-HR), for
example, asked that the Department narrow the definition. Some of these
commenters wrote that the definition applies more broadly than is
necessary to achieve the goals of the Executive Order. Others noted
that State and local paid sick time laws do not apply as broadly or
that they believed it would be difficult for contractors to verify
whether a relationship of the type described exists. A few commenters
proposed specific replacement definitions: The Independent Electrical
Contractors, Inc. (IEC) asked that the Department interpret the Order
to allow an employee to use paid sick leave to care only for
individuals with whom the employee has a biological or legal
relationship; Koga Engineering and Construction, Royal Contracting
Company LTD, Master Sheet Metal, Inc., and the General Contractors
Association of Hawaii asked that this category extend only to family
members for whom an employee can take FMLA leave; EEAC asked that it
extend only to a ``person with whom the employee has a significant
personal bond that is or is like that of a child, parent or spouse'';
and Vigilant asked that the Department interpret the word ``affinity''
to mean only a relationship by marriage.
The Department carefully considered the comments received and is
adopting this definition as proposed. The term has been used with
respect to sick leave for Federal employees since 1994, see Final Rule,
Absence and Leave; Sick Leave, 59 FR 62266, 62266-67, 62270-71
(codified at 5 CFR 630.201(b)(v)), and OPM has indicated that it has
had and continues to have an expansive meaning, see 75 FR 33491-92. The
Department agrees with commenters that these facts suggest that the
term in the Executive Order is best interpreted to have the same
meaning as the term in the OPM regulations and that OPM does not
consider its use of the term to have proved unworkable. Furthermore,
the Department will not depart from the plain meaning of the text,
which clearly extends beyond marital relationships or those referenced
in the FMLA and reflects a general intent to be broad and inclusive by
adopting the specific, significantly narrower definitions some
commenters suggested. The Department notes that the issue of contractor
verification of employees' relationships is addressed below in the
discussions of requests to use paid sick leave and certification or
documentation of the need to use paid sick leave; because contractor
inquiries into employees' private lives are deliberately limited, the
Department does not expect such verification to be intensive or
complicated.
The Department proposed to define intimate partner, a term used in
the definition of domestic violence, to mean a person who is or has
been in a social relationship of a romantic or intimate nature with the
victim, where the existence of such a relationship shall be determined
based on a consideration of the length of the relationship; the type of
relationship; and the frequency of interaction between the persons
involved in the relationship. This definition was derived from the
definition of ``dating partner'' in the VAWA. See 42 U.S.C.
13925(a)(9). No commenter suggested any revisions to this definition,
and the Department adopts it as proposed.
In the Final Rule, the Department has added a definition of
multiemployer plan, because that term is used in the final regulations
for reasons explained in the discussion of Sec. 13.8. The term is
defined to mean a plan to which more than one employer is required to
contribute and which is maintained pursuant to one or more CBAs between
one or more employee organizations and more than one employer. This
definition is derived from, but not identical to, the definition of the
term under the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. 1001 et seq. See 29 U.S.C. 1002(37). Because of the
differences between the ERISA definition and that used here, a plan
could qualify as a multiemployer plan for purposes of part 13 even
though it does not so qualify for purposes of ERISA.
The Department proposed that the term new contract have the same
meaning as in the Minimum Wage Executive Order Final Rule, but with
dates altered to reflect the timing contemplated in section 7 of
Executive Order 13706. See 79 FR 60722 (codified at 29 CFR 10.2); 80 FR
54700. Under the proposed definition, a new contract was a contract
that results from a solicitation issued on or after January 1, 2017, or
a contract that is awarded outside the solicitation process on or after
January 1, 2017. This term included both new contracts and replacements
for expiring contracts. It did not apply to the unilateral exercise of
a pre-negotiated option to renew an existing contract by the Federal
Government. The proposal explained that for purposes of the Executive
Order, a contract that is entered into prior to January 1, 2017 would
constitute a new contract if, through bilateral negotiation, on or
after January 1, 2017: (1) The contract is renewed; (2) the contract is
extended, unless the extension is made pursuant to a term in the
contract as of December 31, 2016 providing for a short-term limited
extension; or (3) the contract is amended pursuant to a modification
that is outside the scope of the contract. The Minimum Wage Executive
Order rulemaking explained that this definition was derived from
section 8 of that Executive Order, 79 FR 9853, is consistent with the
convention set forth in section 1.108(d) of the FAR, 48 CFR 1.108(d),
and was developed in part in response to comments on the proposed
definition of new contract that appeared in the Minimum Wage Executive
Order NPRM. 79 FR 60643, 60646-49. No commenter suggested altering this
definition, and the Department adopts it as proposed. Additional
discussion of what constitutes a new contract appears in the text
addressing Sec. 13.3 below.
[[Page 67609]]
For purposes of the Executive Order and part 13, which use the
terms in reference to domestic violence, sexual assault, or stalking,
the Department proposed to define obtain additional counseling, seek
relocation, seek assistance from a victim services organization, or
take related legal action to mean to spend time arranging, preparing
for, or executing acts related to addressing physical injuries or
mental or emotional impacts resulting from being a victim of domestic
violence, sexual assault, or stalking. Under the NPRM, such acts
included finding and using services of a counselor or victim services
organization (a term also defined in Sec. 13.2) intended to assist a
victim to respond to or prevent future incidents of domestic violence,
sexual assault, or stalking; identifying and moving to a different
residence to avoid being a victim of domestic violence, sexual assault,
or stalking; or a victim's pursuing any related legal action (another
term defined in Sec. 13.2). The Department stated in the proposal that
counseling could, but need not be, provided by a health care provider.
The Department did not receive comments addressing this definition and
adopts it as proposed.
The Department proposed to define obtaining diagnosis, care, or
preventive care from a health care provider to mean receiving services
from a health care provider, whether to identify, treat, or otherwise
address an existing condition or to prevent potential conditions from
arising. The Department interpreted this term broadly and provided the
following non-exhaustive list of examples: Obtaining a prescription for
antibiotics at a health clinic, attending an appointment with a
psychologist, having an annual physical or gynecological exam, or
receiving a teeth cleaning from a dentist's assistant. The proposed
definition further noted that it included time spent traveling to and
from the location at which such services are provided or recovering
from receiving such services. The Center for the Study of Social Policy
commented that the Department should state explicitly that this
definition includes seeking treatment for drug or substance abuse.
Under the definition as proposed and adopted, any treatment for drug,
alcohol, or another addiction received from a practitioner who is a
health care provider as defined in Sec. 13.2 would be included in this
definition. The Department adopts the definition as proposed.
The Department proposed to define the term Office of Administrative
Law Judges to mean the Office of Administrative Law Judges, U.S.
Department of Labor. The Department adopts this definition as proposed.
Proposed Sec. 13.2 defined the term option by adopting the
definition of that term used in the Minimum Wage Executive Order
rulemaking, which in turn adopted the definition set forth in section
2.101 of the FAR, 48 CFR 2.101. 79 FR 60643, 60722 (codified at 29 CFR
10.2). Under the proposal, the term option meant a unilateral right in
a contract by which, for a specified time, the Federal Government may
elect to purchase additional supplies or services called for by the
contract, or may elect to extend the term of the contract. No
commenters suggested changes to this definition, and it is adopted as
proposed.
The Department proposed to define paid sick leave to mean
compensated absence from employment that is required by Executive Order
13706 and part 13. In the NPRM and again in this Final Rule, the
Department used and uses ``paid sick leave'' to refer to the leave
required by the Order and part 13 and ``paid sick time'' to refer more
generally to any compensated absence from work for time used for
purposes similar (although not necessarily identical) to the purposes
described in the Order, including as required by State and local laws
or as provided pursuant to contractors' existing policies or under
CBAs. The Department received no comments regarding this definition and
adopts it as proposed.
Proposed Sec. 13.2 defined the term parent to mean (1) a
biological, adoptive, step, or foster parent of the employee, or a
person who was a foster parent of the employee when the employee was a
minor; (2) a person who is the legal guardian of the employee or was
the legal guardian of the employee when the employee was a minor or
required a legal guardian; (3) a person who stands in loco parentis to
the employee or stood in loco parentis to the employee when the
employee was a minor or required someone to stand in loco parentis; or
(4) a parent, as described in paragraphs (1) through (3) of the
definition, of an employee's spouse or domestic partner. This
definition was adopted from the OPM regulations regarding leave for
Federal employees. 5 CFR 630.102(b). EEAC urged the Department to use
the definition of parent provided in the FMLA in order not to include
the parent of an employee's spouse or domestic partner. Because, as
noted above, the Department interprets the Order's deliberate inclusion
of family members beyond those for whom an employee could take FMLA
leave to indicate a general intent to allow the use of leave to care
for a broad set of family members, it is adopting the definition as
proposed.
The Department proposed to define physical or mental illness,
injury, or medical condition as any disease, sickness, disorder, or
impairment of, or any trauma to, the body or mind. The Department
explained in the NPRM that the Executive Order intended for this term
to be understood broadly, to include any illness, injury, or medical
condition, regardless of whether it requires attention from a health
care provider or whether it would be a ``serious health condition''
that qualifies for use of leave under the FMLA. See 29 U.S.C. 2611(11);
29 CFR 825.113. In the NPRM, the Department provided the following non-
exclusive list of conditions included within the proposed definition: A
common cold, ear infection, upset stomach, ulcer, flu, headache,
migraine, sprained ankle, broken arm, or depressive episode. The
Department did not receive comments addressing this definition and
adopts it as proposed.
The Department proposed to define predecessor contract to mean a
contract that precedes a successor contract. Because this definition
was only included in the proposed rule in connection with the provision
in Sec. 13.5(b)(4) requiring reinstatement of paid sick leave by
successor contractors, which for the reasons explained below does not
appear in the Final Rule, the Department has removed this definition
from Sec. 13.2.
The proposed rule defined procurement contract for construction as
that term was defined for purposes of the Minimum Wage Executive Order
Final Rule, that is, to mean a contract for the construction,
alteration, or repair (including painting and decorating) of public
buildings or public works and which requires or involves the employment
of mechanics or laborers, and any subcontract of any tier thereunder.
79 FR 60723 (codified at 29 CFR 10.2). That proposed definition, which
was derived from language found at 40 U.S.C. 3142(a) and 29 CFR 5.2(h),
included any contract subject to the DBA. See 79 FR 60643. No commenter
addressed this definition, and it is adopted as proposed.
The Department proposed to define the term procurement contract for
services to mean a contract the principal purpose of which is to
furnish services in the United States through the use of service
employees, and any subcontract of any tier thereunder. The proposal
also stated that the term includes any
[[Page 67610]]
contract subject to the SCA. This proposed definition was derived, as
explained in the Minimum Wage Executive Order, from language set forth
in 41 U.S.C. 6702(a), 29 CFR 4.1a(e), and 29 CFR 9.2. 79 FR 60643. The
Department did not receive comments specifically addressing this
definition. For the reasons explained in the discussion of service
contract coverage below, the Department is adopting the definition as
proposed.
For purposes of the Executive Order and part 13, which use the
terms in reference to domestic violence, sexual assault, or stalking,
the Department proposed to define related legal action or related civil
or criminal legal proceeding to mean any type of legal action, in any
forum, that relates to domestic violence, sexual assault, or stalking,
including, but not limited to, family, tribal, territorial,
immigration, employment, administrative agency, housing matters, campus
administrative or protection or stay-away order proceedings, and other
similar matters; and criminal justice investigations, prosecutions, and
post-trial matters (including sentencing, parole, and probation) that
impact the victim's safety and privacy. This definition, which the
Department intended to be broad and inclusive, was derived from the
definition of ``legal assistance'' that appears in the VAWA. See 42
U.S.C. 13925(a)(19). The Department explained in the NPRM that this
definition encompassed actions in any civil or criminal court,
including a juvenile court. The definition also included administrative
proceedings run by institutions of higher education (college, community
college, university, or trade school), such as those related to alleged
violations of Title IX of the Education Amendments of 1972, 20 U.S.C.
1681 et seq. The Department received no comments regarding this
definition and adopts it as proposed.
Under proposed Sec. 13.2, Secretary meant the Secretary of Labor
and included any official of the U.S. Department of Labor authorized to
perform any of the functions of the Secretary of Labor under part 13.
The Department adopts this definition as proposed.
The Department proposed to define the term Service Contract Act to
mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41
U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR
4.1a(a). This provision is adopted as proposed.
The proposed definition of sexual assault in Sec. 13.2 was any
nonconsensual sexual act proscribed by Federal, tribal, or State law,
including when the victim lacks capacity to consent. This definition
was adopted from the VAWA. See 42 U.S.C. 13925(a)(29). No commenter
suggested revising this definition, and the Department adopts it as
proposed.
In the NPRM, the term solicitation was defined to have the meaning
given to it in the Minimum Wage Executive Order Final Rule, i.e., any
request to submit offers, bids, or quotations to the Federal
Government. 79 FR 60673 (codified at 29 CFR 10.2). As explained in the
Minimum Wage Executive Order rulemaking, the definition was based on
language from 29 CFR 9.2, and requests for information issued by
Federal agencies and informal conversations with federal workers do not
fall within the definition. See 79 FR 60643-44. No comments addressed
this definition, and it is adopted as proposed.
The Department proposed to define the term spouse as the other
person with whom an individual entered into marriage as defined or
recognized under State law for purposes of marriage in the State in
which the marriage was entered into or, in the case of a marriage
entered into outside of any State, if the marriage is valid in the
place where entered into and could have been entered into in at least
one State. This definition included an individual in a common law
marriage that was entered into in a State that recognizes such
marriages or, if entered into outside of any State, is valid in the
place where entered into and could have been entered into in at least
one State. This definition was derived from the FMLA regulations. See
29 CFR 825.122 (as updated by Definition of Spouse Under the Family and
Medical Leave Act, 80 FR 9989 (Feb. 25, 2015)). As the Department noted
in the NPRM, marriage and common law marriage include both same-sex and
opposite-sex marriages or common law marriages. The Department did not
receive comments regarding this definition and adopts it as proposed.
Under proposed Sec. 13.2, stalking meant engaging in a course of
conduct directed at a specific person that would cause a reasonable
person to fear for his or her safety or the safety of others or suffer
substantial emotional distress. This definition was adopted from the
VAWA. See 42 U.S.C. 13925(a)(30). The Department did not receive
comments regarding this definition and adopts it as proposed.
The Department proposed to define successor contract to mean a
contract for the same or similar services as were provided by a
different predecessor contractor at the same location. This definition
does not appear in the Final Rule because, for the reasons explained in
the discussion of Sec. 13.5(b)(4), the term is no longer relevant.
In proposed Sec. 13.2, the Department defined the term United
States as it did in the Minimum Wage Executive Order rulemaking, which
used the definitions of that term set forth in 29 CFR 9.2 and 48 CFR
2.101, though it did not adopt any of the exceptions to the definition
of the term set forth in the FAR. See 79 FR 60645. Based on those
regulations, United States meant the United States and all executive
departments, independent establishments, administrative agencies, and
instrumentalities of the United States, including corporations of which
all or substantially all of the stock is owned by the United States, by
the foregoing departments, establishments, agencies, and
instrumentalities, including nonappropriated fund instrumentalities.
The proposed definition further noted that when used in a geographic
sense, the United States meant the 50 States and the District of
Columbia. The Department did not receive comments regarding this
definition and adopts it as proposed.
The Department proposed to define victim services organization to
mean a nonprofit, nongovernmental, or tribal organization or rape
crisis center, including a State or tribal coalition, that assists or
advocates for victims of domestic violence, sexual assault, or
stalking, including domestic violence shelters, faith-based
organizations, and other organizations, with a documented history of
effective work concerning domestic violence, sexual assault, or
stalking. This definition was based on the definition of ``victim
service provider'' in the VAWA. See 42 U.S.C. 13925(a)(43). The
Department intended this definition to include organizations that
provide services to adult, teen, and/or child victims of domestic
violence, sexual assault, or stalking. The Department did not receive
comments regarding this definition and adopts it as proposed.
The Department proposed to define Violence Against Women Act as the
Violence Against Women Act of 1994, 42 U.S.C. 13925 et seq., and its
implementing regulations. This definition is adopted as proposed.
Finally, the Department proposed to define Wage and Hour Division
to mean the Wage and Hour Division within the U.S. Department of Labor.
This definition is adopted as proposed.
Section 13.3 Coverage
Proposed Sec. 13.3 addressed and implemented the coverage
provisions of section 6 of Executive Order 13706. 80 FR 54697-700.
[[Page 67611]]
Proposed Sec. 13.3(a) stated that part 13 applies to any new
contract with the Federal Government, unless excluded by Sec. 13.4,
provided that: (1)(i) It is a procurement contract for construction
covered by the DBA; (ii) it is a contract for services covered by the
SCA; (iii) it is a contract for concessions, including any concessions
contract excluded from coverage under the SCA by Department of Labor
regulations at 29 CFR 4.133(b); or (iv) it is a contract in connection
with Federal property or lands and related to offering services for
Federal employees, their dependents, or the general public; and (2) the
wages of employees performing on or in connection with such contract
are governed by the DBA, SCA, or FLSA, including employees who qualify
for an exemption from the FLSA's minimum wage and overtime provisions.
As explained in more detail below in the discussion of covered
employees, the Department is promulgating this provision as proposed.
Proposed Sec. 13.3(b) incorporated the monetary value thresholds
referred to in section 6(e) of the Executive Order. Specifically, it
provided that for contracts covered by the SCA or the DBA, part 13
applies to prime contracts only at the thresholds specified in those
statutes, and for procurement contracts where employees' wages are
governed by the FLSA (i.e., procurement contracts not covered by the
SCA or DBA), part 13 applies when the prime contract exceeds the micro-
purchase threshold, as defined in 41 U.S.C. 1902(a). Proposed Sec.
13.3(b) further explained that for all other covered prime contracts
and for all subcontracts awarded under covered prime contracts, part 13
applies regardless of the value of the contract. In this context, ``all
other prime contracts'' covered by the Order and part 13 referred to
non-procurement concessions contracts not covered by the SCA and non-
procurement contracts with the Federal Government in connection with
Federal property or lands and related to offering services for Federal
employees, their dependents, or the general public not covered by the
SCA. The Department received one comment relevant to this provision,
addressed in the discussion of ``procurement contracts for
construction'' below, and adopts Sec. 13.3(b) as proposed.
Proposed Sec. 13.3(c), which was identical to the analogous
provision in the Minimum Wage Executive Order Final Rule, 29 CFR
10.3(c), stated that part 13 only applies to contracts with the Federal
Government requiring performance in whole or in part within the United
States. It further explained that if a contract with the Federal
Government is to be performed in part within and in part outside the
United States and is otherwise covered by the Executive Order and part
13, the requirements of the Order and part 13 would apply with respect
to that part of the contract that is performed within the United
States. As explained below, the Department adopts this provision as
proposed.
Proposed Sec. 13.3(d), adopted from the Minimum Wage Executive
Order regulations, 29 CFR 10.3(d), explained that part 13 does not
apply to contracts subject to the Walsh-Healey Public Contracts Act, 41
U.S.C. 6501 et seq. The Department is adopting this provision largely
as proposed, but with one modification described below in the section
discussing such contracts.
The preamble to the proposed rule addressed several issues related
to the coverage provisions in some detail, and the Department repeats
those points here, in addition to responding to comments relevant to
them, in order to ensure that this Final Rule contains a full
discussion of the scope of coverage under the Order. As noted in the
NPRM, the Minimum Wage Executive Order Final Rule addressed many of the
same issues, and much of the discussion here reflects interpretations
described in that rulemaking.
Coverage of Executive Agencies and Departments
Executive Order 13706 applies to all ``[e]xecutive departments and
agencies.'' 80 FR 54697. Like the Minimum Wage Executive Order, it
strongly encourages but does not compel ``[i]ndependent agencies'' to
comply with its requirements. 80 FR 54700; see also 79 FR 9853. The
Department explained in the NPRM that this exemption from coverage is
narrow, in light of the Executive Order's broad goal of providing paid
sick leave to employees on contracts with the Federal Government. The
terms executive departments and agencies (modified to include the U.S.
Postal Service, as explained above) and independent agencies are
defined in Sec. 13.2. The Department received no comments regarding
this interpretation.
Coverage of New Contracts With the Federal Government
Proposed Sec. 13.3(a) provided that the requirements of the
Executive Order apply to a ``new contract with the Federal
Government.'' By applying only to ``new contracts,'' the Executive
Order ensures that contracting agencies and contractors will have
sufficient notice of any obligations under Executive Order 13706 and
can take into account any potential impact of the Order prior to
entering into ``new contracts'' on or after January 1, 2017. As
discussed above, the proposed definition of the term contract was
broadly inclusive, and the proposed definition of new contract was
modeled on the definition of that term in the Minimum Wage Executive
Order Final Rule, 29 CFR 10.2, and incorporated the provisions of
section 7 of Executive Order 13706. Therefore, as proposed, part 13
applied to covered contracts with the Federal Government that result
from solicitations issued on or after January 1, 2017, or to contracts
that are awarded outside the solicitation process on or after January
1, 2017. For example, any covered contracts that are added to the GSA
Schedule in response to GSA Schedule solicitations issued on or after
January 1, 2017 will qualify as ``new contracts'' subject to the Order;
any covered task orders issued pursuant to those contracts also would
be deemed to be ``new contracts.'' This included contracts to add new
covered services as well as contracts to replace expiring contracts.
As explained in the discussion of Sec. 13.2, the definition of new
contract (adopted as proposed) also provides that the term includes
both new contracts and replacements for expiring contracts. Consistent
with the Minimum Wage Executive Order Final Rule, however, the
definition does not include the unilateral exercise of a pre-negotiated
option to renew an existing contract by the Federal Government. As
discussed above, option means a unilateral right in a contract by
which, for a specified time, the Federal Government may elect to
purchase additional supplies or services called for by the contract, or
may elect to extend the term of the contract. See 48 CFR 2.101.
The proposed definition of new contract also provided that for
purposes of the Executive Order, a contract that is entered into prior
to January 1, 2017 constituted a new contract if, through bilateral
negotiation, on or after January 1, 2017: (1) The contract is renewed;
(2) the contract is extended, unless the extension is made pursuant to
a term in the contract as of December 31, 2016 providing for a short-
term limited extension; or (3) the contract is amended pursuant to a
modification that is outside the scope of the contract. These
statements have the same meaning in part 13 as they did in the Minimum
Wage Executive Order rulemaking. See 79 FR 60646-49. The NPRM also
noted the Department's understanding that contract extensions may be
accomplished through options created by an agency pursuant to FAR
[[Page 67612]]
clause 52.217-8 (which allows for an extension of time of up to 6
months for a contractor to perform services that were acquired but not
provided during the contract period) or FAR clause 52.217-9 (which
provides for an extension of the contract term to provide additional
services for a limited term specified in the contract at previously
agreed upon prices). As explained, the contracting agency's exercise of
extensions under these clauses would not trigger application of the
Order's paid sick leave requirements because the clauses give the
contracting agency a discretionary right to unilaterally exercise the
option to extend, and unilateral options are excluded from the
definition of ``new contract.''
Specifically, and particularly in light of these clauses, a
bilaterally negotiated extension of an existing contract on or after
January 1, 2017 would be viewed as a ``new contract'' unless the
extension is made pursuant to a term in the contract as of December 31,
2016 providing for a short-term limited extension, in which case the
extension would not constitute a ``new contract'' and would not be
covered. Therefore, a short-term, bilaterally negotiated extension of
contract terms (e.g., an extension of 6 months or less) that was
provided for by the pre-negotiated terms of the contract prior to
January 1, 2017, such as a bridge to prevent a gap in service, would
not constitute a new contract. See Interim Final Rule, Federal
Acquisition Regulation; Establishing a Minimum Wage for Contractors, 79
FR 74544, 74545 (Dec. 15, 2014) (providing that contracting officers
``shall include'' the FAR contract clause to implement the Minimum Wage
Executive Order when ``bilateral modifications extending the contract .
. . are individually or cumulatively longer than six months''). In
addition, when a contracting agency exercises its unilateral right to
extend the term of an existing service contract and simply makes
pricing adjustments based on increased labor costs that result from its
obligation to include a current SCA wage determination pursuant to 29
CFR 4.4 but no bilateral negotiations occur (other than any necessary
to determine and effectuate those pricing adjustments), the Department
would not view the exercise of that option as a ``new contract''
covered by the Executive Order.
An extension that was bilaterally negotiated and not previously
authorized by the terms of the existing contract, however, would be a
``new contract'' subject to the Order's paid sick leave requirements. A
long-term extension of an existing contract will qualify as a ``new
contract'' subject to the Executive Order even if such an extension was
provided for by a pre-negotiated term of the contract.
With respect to the coverage of other contract modifications, the
Department's approach is identical to that in the Minimum Wage
Executive Order Final Rule. 79 FR 60646-49. It reflects that
modifications within the scope of the contract do not in fact
constitute new contracts. Long-standing contracting principles
recognize that an existing contract, especially a larger one, will
often require modifications, which may include very modest changes
(e.g., a small change to a delivery schedule). Therefore, regulations
such as the FAR do not require agencies to create new contracts to
support these actions. Accordingly, contract modifications that are
within the scope of the contract within the meaning of the FAR, see 48
CFR 6.001(c) and related case law, are not ``new contracts'' under the
proposed definition, even when undertaken after January 1, 2017. The
Department's proposal nonetheless strongly encouraged agencies to
bilaterally negotiate, as part of any in-scope modification,
application of the Executive Order's paid sick leave requirements so
that such modified contracts could take advantage of the benefits of
such leave.
As also explained in the NPRM, if the parties bilaterally negotiate
a modification that is outside the scope of the contract, the agency
will be required to create a new contract, triggering solicitation and/
or justification requirements, and thus such a modification after
January 1, 2017 will constitute a ``new contract'' subject to the
Executive Order's paid sick leave requirements. For example, if an
existing SCA-covered contract for janitorial services at a Federal
office building is modified by bilateral negotiation after January 1,
2017 to also provide for security services at that building, such a
modification would likely be regarded as outside the scope of the
contract and thus qualify as a ``new contract'' subject to the
Executive Order. Similarly, if an existing DBA-covered contract for
construction work at Site A was modified by bilateral negotiation after
January 1, 2017 to also cover construction work at Site B, such a
modification would generally be viewed as outside the scope of the
contract and thus trigger coverage of the Executive Order. The
Department cautioned, however, that whether a modification qualifies as
``within the scope'' or ``outside the scope'' of the contract is
necessarily a fact-specific determination. See, e.g., AT&T
Communications, Inc. v. Wiltel, Inc., 1 F.3d 1201, 1205 (Fed. Cir.
1993).
The Department did not receive comments suggesting changes to these
interpretations regarding what constitutes a ``new contract.'' AGC
asked whether new task orders under existing indefinite-delivery,
indefinite-quantity (IDIQ) contracts qualify as new contracts for
purposes of the Executive Order. A task order under an IDIQ contract
covered by the Executive Order and part 13 would itself be covered by
the Order and part 13 to the extent the task order falls within one of
the four categories of contracts covered by the Order. A task order
under (and within the scope of) an IDIQ contract that is not covered by
the Executive Order and part 13, either because the solicitation for
the IDIQ contract was issued before January 1, 2017, or the IDIQ
contract was awarded outside the solicitation process before January 1,
2017, would not qualify under the Order and part 13 as a new contract
even if the task order was issued after January 1, 2017. However, the
Department recommended in the NPRM, and reiterates here, that the FARC
should encourage, if not require, contracting officers to modify
existing IDIQ contracts in accordance with FAR section 1.108(d)(3) to
include the paid sick leave requirements of Executive Order 13706 and
part 13, particularly if the remaining ordering period extends at least
6 months and the amount of remaining work or number of orders expected
is substantial. See 79 FR 74545 (providing that contracting officers
``are strongly encouraged to include'' the FAR contract clause to
implement the Minimum Wage Executive Order in ``existing indefinite-
delivery indefinite-quantity contracts, if the remaining ordering
period extends at least six months and the amount of remaining work or
number of orders expected is substantial'').
Coverage of Types of Contractual Arrangements
Proposed Sec. 13.3(a)(1) set forth the specific types of
contractual arrangements with the Federal Government that are covered
by the Executive Order. Consistent with the intent of Executive Order
13706 to apply to a wide range of contracts with the Federal Government
for services or construction, proposed Sec. 13.3(a)(1) implemented the
Executive Order by generally extending coverage to procurement
contracts for construction covered by the DBA; service contracts
covered by the SCA; concessions contracts, including any concessions
contract excluded by the Department's regulations at 29 CFR 4.133(b);
and
[[Page 67613]]
contracts in connection with Federal property or lands and related to
offering services for Federal employees, their dependents, or the
general public. Each of these categories of contractual agreements is
discussed in greater detail below. The Department notes that, as was
also the case under the Minimum Wage Executive Order rulemaking, these
categories are not mutually exclusive--a concessions contract might
also be covered by the SCA, as might a contract in connection with
Federal property or lands, for example--but a contract that falls
within any one of the four categories is covered.
Procurement Contracts for Construction: Section 6(d)(i)(A) of the
Executive Order extends coverage to any ``procurement contract for . .
. construction.'' 80 FR 54699. As explained in the NPRM and the Minimum
Wage Executive Order rulemaking, 79 FR 60650, this language indicates
that the Executive Order and part 13 apply to contracts subject to the
DBA and that they do not apply to contracts subject only to the Davis-
Bacon Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60).
The Final Rule makes no change to this interpretation.
The DBA applies, in relevant part, to contracts to which the
Federal Government is a party, for the construction, alteration, or
repair, including painting and decorating, of public buildings and
public works of the Federal Government and which require or involve the
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's
regulatory definition of construction is expansive and includes all
types of work done on a particular building or work by laborers and
mechanics employed by a construction contractor or construction
subcontractor. See 29 CFR 5.2(j). The DBA's implementing regulations
define the term ``public building or public work'' as any building or
work, the construction, prosecution, completion, or repair of which is
carried on directly by authority of or with funds of a Federal agency
to serve the interest of the general public. See 29 CFR 5.2(k).
Proposed Sec. 13.3(b) implemented section 6(e) of Executive Order
13706, 80 FR 52699-700, which provides that the Order applies only to
DBA-covered prime contracts that exceed the $2,000 value threshold
specified in the DBA. See 40 U.S.C. 3142(a). Under this provision,
which is adopted as proposed, there is no value threshold requirement
for application of Executive Order 13706 and part 13 to subcontracts
awarded under such prime contracts. The Mechanical Contractors
Association of America (MCAA) asked in its comment why the proposal
covered subcontracts that fall below the DBA threshold amount. The
Department believes coverage of subcontracts without regard to their
monetary value is appropriate because it is consistent with the DBA
itself, which applies the threshold only to prime contracts, 40 U.S.C.
3142(a), is consistent with the coverage provisions of the Minimum Wage
Executive Order, which also do not apply threshold amounts to
subcontracts, 29 CFR 10.3(b), and ensures that employees who work for
lower-tier contractors on projects in which the prime contract is DBA-
covered are not denied access to paid sick leave.
Procurement Contracts for Services: Proposed Sec. 13.3(a)(1)(ii)
provided, in language identical to that of 29 CFR 10.3(a)(1)(ii) as
promulgated by the Minimum Wage Executive Order Final Rule, 79 FR
60723, that coverage of the Executive Order and part 13 encompasses any
``contract for services covered by the Service Contract Act.''
That proposed provision implemented section 6(d)(i)(B) of the
Executive Order, which states that the Order applies to ``a contract or
contract-like instrument for services covered by the Service Contract
Act.'' 80 FR 54699. The SCA applies (subject to the exceptions
discussed below) to any contract entered into by the United States that
``has as its principal purpose the furnishing of services in the United
States through the use of service employees.'' 41 U.S.C. 6702(a)(3);
see also 29 CFR 4.110. The SCA is intended to cover a wide variety of
service contracts with the Federal Government, so long as the principal
purpose of the contract is to provide services using service employees.
See, e.g., 29 CFR 4.130(a). SCA coverage exists regardless of the
direct beneficiary of the services or the source of the funds from
which the contractor is paid for the service and irrespective of
whether the contractor performs the work in its own establishment, on a
Government installation, or elsewhere. 29 CFR 4.133(a).
The NPRM noted, however, that in addition to the provision in
section 6(d)(i)(B) of the Executive Order extending coverage to
contracts covered by the SCA, section 6(d)(i)(A) provides that the
Order applies to ``a procurement contract for services.'' 80 FR 54699.
In the Minimum Wage Executive Order rulemaking, the Department
interpreted these two phrases together to mean that Executive Order
13658 applied to all procurement and non-procurement contracts covered
by the SCA. As the NPRM to implement Executive Order 13706 explained,
the phrase ``a procurement contract for services'' could instead be
construed to encompass a category or categories of procurement
contracts for services beyond those covered by the SCA.
The SCA does not apply to all procurement contracts with the
Federal Government for services. For example, the SCA itself contains a
list of exemptions from its coverage: It does not apply to ``a contract
for the carriage of freight or personnel by vessel, airplane, bus,
truck, express, railway line or oil or gas pipeline where published
tariff rates are in effect''; ``a contract for the furnishing of
services by radio, telephone, telegraph, or cable companies, subject to
the Communications Act of 1934''; ``a contract for public utility
services, including electric light and power, water, steam, and gas'';
``an employment contract providing for direct services to a Federal
agency by an individual''; and ``a contract with the United States
Postal Service, the principal purpose of which is the operation of
postal contract stations.'' 41 U.S.C. 6702(b); see also 29 CFR 4.115-
4.122. Additionally, the SCA regulations at 29 CFR 4.123(d) and (e)
identify certain categories of contracts the Department has exempted
from SCA coverage pursuant to authority granted by the SCA, see 41
U.S.C. 6707(b), to the extent regulatory criteria for exclusion from
coverage are satisfied. For example, 29 CFR 4.123(e)(1)(i)(A) exempts
from SCA coverage certain contracts principally for the maintenance,
calibration, or repair of automated data processing equipment and
office information/word processing systems. Furthermore, the SCA does
not apply to contracts for services to be performed exclusively by
persons who are not service employees, i.e., persons who qualify as
bona fide executive, administrative, or professional employees as
defined in the FLSA's regulations at 29 CFR part 541. 29 CFR
4.113(a)(2); see also 41 U.S.C. 6701(a)(3)(C), 6702(a)(3); WHD Field
Operations Handbook (FOH) ] 14c07. Similarly, a contract for services
``performed essentially by bona fide executive, administrative, or
professional employees, with the use of service employees being only a
minor factor in contract performance,'' is not covered by the SCA. 29
CFR 4.113(a)(3); FOH ] 14c07.
In the proposed rule, the Department sought comment as to whether
it should include within the coverage of Executive Order 13706 a wider
set of procurement contracts for services than those contracts for
services covered by
[[Page 67614]]
the SCA. The Department's proposal noted that, for example, an
interpretation treating as covered procurement contracts for services
performed exclusively or essentially by employees who qualify as bona
fide executive, administrative, or professional employees as defined in
the FLSA's regulations at 29 CFR part 541--a type of employee covered
by section 6(d)(ii) of the Order because such employees qualify for an
exemption from the FLSA's minimum wage and overtime provisions, 80 FR
54700--would extend the Order's paid sick leave requirements to some
such employees who would otherwise not be covered by the Order. The
proposal further noted that an interpretation treating as covered other
types of service contracts explicitly exempted from SCA coverage under
41 U.S.C. 6702(b) and 29 CFR 4.123(d) and (e) would also extend the
Order's paid sick leave requirements to at least some employees on any
such contracts; although those employees' wages would by definition not
be covered by the SCA, under such an interpretation, employees
performing work on or in connection with such contracts whose wages
were governed by the FLSA, including employees who qualify for an
exemption from its minimum wage and overtime provisions, would be
entitled to paid sick leave under the Order and part 13. The Department
sought comments on the potential scope and implications of such
coverage, including whether employees who work on or in connection with
certain categories of non-SCA-covered service contracts currently
typically do not have paid sick time or do not have any type of paid
time off such that the protections of Executive Order 13706 would be
particularly significant to them.
Numerous commenters, including CLASP, Equal Rights Advocates, the
CAP Women's Initiative, Caring Across Generations, the Working Families
Organization, Women Employed, the Center for Popular Democracy (CPD),
and the National Association of County and City Health Officials, urged
the Department to ensure that the Executive Order covers all
procurement contracts for services in order to extend paid sick leave
benefits to as many employees as possible. The AFL-CIO also encouraged
the Department to expand contract coverage under the Order and part 13.
Other commenters, such as PSC, the Chamber/IFA, and the American
Benefits Council, however, urged the Department not to expand coverage
to service contracts not covered by the SCA. In particular, PSC
asserted that covering contracts for services performed exclusively or
essentially by employees who qualify as bona fide executive,
administrative, or professional employees would discourage technology
and consulting companies from doing business with the Federal
Government. It also asserted that contracts such as those involving
utilities and airlines are exempted from the SCA by regulation for
reasons that would also make application of paid sick leave
requirements particularly difficult and therefore inappropriate.
After careful consideration of these comments, the Department is
adopting Sec. 13.3(a)(1)(ii) as proposed, that is, it is interpreting
the Executive Order to cover contracts for services covered by the SCA
and not (other than contracts covered by Sec. 13.3(a)(1)(iii) and
(iv)) contracts for services that, although entered into with an
executive department or agency, are not covered by the SCA. Although
the Department continues to believe in the importance of ensuring that
employees performing work on or in connection with Federal contracts
have access to paid sick leave, in this case, for reasons of
consistency with the Minimum Wage Executive Order Final Rule and
familiarity with the types of obligations and requirements imposed by
the SCA and Minimum Wage Executive Order, the Department believes the
best course is the one proposed in the NPRM.
The Department reiterates, however, that under Sec.
13.3(a)(1)(iii) and (iv) (as well as Sec. 13.3(d), described below),
irrespective of whether a contract is covered by part 13 because it is
an SCA-covered contract, the Order's paid sick leave requirements apply
to service contracts that are concessions contracts, including all
concessions contracts excluded by the SCA regulations at 29 CFR
4.133(b); apply to service contracts that are in connection with
Federal property or lands and related to offering services for Federal
employees, their dependents, or the general public; and do not apply to
contracts for the manufacturing or furnishing of materials, supplies,
articles, or equipment to the Federal Government that are subject to
the Walsh-Healey Public Contracts Act, 41 U.S.C. 6501 et seq.
Proposed Sec. 13.3(b) implemented section 6(e) of the Executive
Order, which provides that for SCA-covered contracts, the Executive
Order applies only to those prime contracts that exceed the threshold
for prevailing wage requirements specified in the SCA. 80 FR 54700.
Although the SCA covers all non-exempted contracts with the Federal
Government that have the ``principal purpose'' of furnishing services
in the United States through the use of service employees regardless of
the value of the contract, the prevailing wage requirements of the SCA
only apply to covered contracts in excess of $2,500. 41 U.S.C.
6702(a)(2). Consistent with the SCA, under proposed Sec. 13.3(b),
there would be no value threshold requirement for application of
Executive Order 13706 and part 13 to subcontracts awarded under such
prime contracts. The Department received no comments on this portion of
the proposed provision.
Contracts for Concessions: Proposed Sec. 13.3(a)(1)(iii)
implemented the Executive Order's coverage of a ``contract or contract-
like instrument for concessions, including any concessions contract
excluded by the Department of Labor's regulations at 29 CFR 4.133(b),''
80 FR 54699, just as the Minimum Wage Executive Order Final Rule
implemented identical language in that Order, see 79 FR 60638, 60652.
The SCA generally covers contracts for concessionaire services. See
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under
section 4(b) of the SCA, however, the SCA's regulations specifically
exempt from coverage concession contracts ``principally for the
furnishing of food, lodging, automobile fuel, souvenirs, newspaper
stands, and recreational equipment to the general public.'' 29 CFR
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\1\ Proposed Sec.
13.3(a)(1)(iii) extended coverage of the Executive Order and part 13 to
all concession contracts with the Federal Government, including those
exempted from SCA coverage. The Department explained that the Executive
Order generally covers, for example, souvenir shops at national
monuments as well as boat rental facilities and fast food restaurants
at National Parks. In addition, consistent with the SCA's implementing
regulations at 29 CFR 4.107(a), the Department proposed that the
Executive Order generally apply to concessions contracts with
nonappropriated fund instrumentalities under the jurisdiction
[[Page 67615]]
of the Armed Forces or other Federal agencies.
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\1\ This exemption applies to certain concessions contracts that
provide services to the general public, but does not apply to
concessions contracts that provide services to the Federal
Government or its personnel or to concessions services provided
incidentally to the principal purpose of a covered SCA contract.
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA
regulatory exemption at 29 CFR 4.133(b) does not apply to National
Park Service contracts for ferry transportation services to and from
Alcatraz Island).
---------------------------------------------------------------------------
Under proposed Sec. 13.3(b), the Executive Order applies to an
SCA-covered concessions contract only if it exceeds $2,500. Id.; 41
U.S.C. 6702(a)(2). Section 6(e) of the Executive Order further provides
that, for procurement contracts where employees' wages are governed by
the FLSA, such as any procurement contracts for concessionaire services
that are excluded from SCA coverage under 29 CFR 4.133(b), part 13
applies only to contracts that exceed the micro-purchase threshold, as
defined in 41 U.S.C. 1902(a). That threshold is currently defined in
the FAR as $3,500. 48 CFR 2.101. The Department proposed that there be
no value threshold for application of Executive Order 13706 and part 13
to subcontracts awarded under covered prime contracts or for non-
procurement concessions contracts that are not covered by the SCA.
The Chamber/IFA and the American Benefits Council commented that
the Order should not apply to concessions contracts, explaining that
such contractors will be disadvantaged by the requirements of the Order
and part 13 because they compete against businesses that do not
contract with the Federal Government and therefore do not bear the
costs of providing paid sick leave. The Department declines to amend
part 13's coverage provisions to exclude concessions contracts because
section 6(d)(i)(C) of the Executive Order explicitly names such
contracts as one of the types to which the Order applies. 80 FR 54699.
Contracts in Connection with Federal Property or Lands and Related
to Offering Services: Proposed Sec. 13.3(a)(1)(iv) implemented section
6(d)(i)(D) of the Executive Order, which extends coverage to contracts
entered into with the Federal Government in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public. See 80 FR 54699;
see also 79 FR 60655 (Minimum Wage Executive Order Final Rule preamble
discussion of identical provisions in the Minimum Wage Executive Order
and 29 CFR part 10). The Department's proposal interpreted this
provision as generally including leases of Federal property, including
space and facilities, and licenses to use such property entered into by
the Federal Government for the purpose of offering services to the
Federal Government, its personnel, or the general public to the extent
that such agreements are not otherwise covered by Sec. 13.3(a)(1). In
other words, under the proposal, a private entity that leases space in
a Federal building to provide services to Federal employees or the
general public would be covered by the Executive Order and part 13
regardless of whether the lease is subject to the SCA. The Department
noted in the NPRM that evidence that an agency has retained some
measure of control over the terms and conditions of the lease or
license to provide services, though not necessary for purposes of
determining applicability of this section, would strongly indicate that
the agreement involved is covered by section 6(d)(i)(D) of the
Executive Order and Sec. 13.3(a)(1)(iv). Pursuant to this
interpretation, a private fast food or casual dining restaurant that
rents space in a Federal building and serves food to the general public
would be subject to the Executive Order's paid sick leave requirements
even if the contract does not constitute a concessions contract for
purposes of the Order and part 13. Additional examples of agreements
that would generally be covered by the Executive Order and part 13
under the proposed approach (regardless of whether they would also be
covered because they are subject to the SCA) include delegated leases
of space in a Federal building from an agency to a contractor whereby
the contractor operates a child care center, credit union, gift shop,
barber shop, health clinic, or fitness center in the space to serve
Federal employees and/or the general public.
Although this definition is broad, the Department noted some limits
to it in the NPRM that it reiterates here. First, coverage under this
proposed section only extends to contracts that are in connection with
Federal property or lands. For example, if a Federal agency contracts
with an outside catering company to provide and deliver coffee for a
conference, such a contract will not be considered a covered contract
under section 6(d)(i)(D), although it would be a covered contract under
section 6(d)(i)(B) if it is covered by the SCA. Moreover, because the
Department does not interpret section 6(d)(i)(D)'s reference to
``Federal property'' to encompass money, purely financial transactions
with the Federal Government, i.e., contracts that are not in connection
with physical property or lands, are not covered by the Order and part
13. In addition, as explained in the proposed rule, section 6(d)(i)(D)
coverage only extends to contracts ``related to offering services for
Federal employees, their dependents, or the general public.''
Therefore, if a Federal agency contracted with a company to solely
supply materials in connection with Federal property or lands, the
Department would not consider the contract to be covered by section
6(d)(i)(D) because it is not a contract related to offering services.
Likewise, because a license or permit to conduct a wedding on Federal
property or lands generally would not relate to offering services for
Federal employees, their dependents, or the general public, but rather
would only relate to offering services to the specific individual
applicant(s), the Department would not consider such a contract covered
by section 6(d)(i)(D).
Proposed Sec. 13.3(b) interpreted section 6(e) of Executive Order
13706, 80 FR 54700, to mean that the Order applies only to SCA-covered
prime contracts in connection with Federal property or lands and
related to offering services if such contracts exceed $2,500. 41 U.S.C.
6702(a)(2); 29 CFR 4.141(a). For procurement contracts in connection
with Federal property or lands and related to offering services where
employees' wages are governed by the FLSA (rather than the SCA), part
13 applies only to such contracts that exceed the $3,500 micro-purchase
threshold, as defined in 41 U.S.C. 1902(a) and 48 CFR 2.101. As to
subcontracts awarded under prime contracts in this category and non-
procurement contracts in connection with Federal property or lands and
related to offering services for Federal employees, their dependents,
or the general public that are not SCA-covered, the Department proposed
and is adopting no value threshold for coverage under Executive Order
13706 and part 13.
The Chamber/IFA and the American Benefits Council commented that
the Order should not apply to contracts in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public for the same reasons
on which they based their objections to the coverage of concessions
contracts. Because section 6(d)(i)(D) of the Executive Order explicitly
names contracts in connection with Federal property or lands and
related to offering services for Federal employees, their dependents,
or the general public as one of the types of contracts to which the
Order applies, 80 FR 54699, the Department does not believe it would be
appropriate to exclude such contracts from coverage under part 13.
Contracts Subject to the Walsh-Healey Public Contracts Act:
Finally, the Department proposed to include as Sec. 13.3(d) a
statement that contracts for the manufacturing or furnishing of
materials, supplies, articles, or
[[Page 67616]]
equipment to the Federal Government that are subject to the Walsh-
Healey Public Contracts Act (PCA), 41 U.S.C. 6501 et seq., are not
covered by Executive Order 13706 or part 13. As noted in the NPRM,
however, where a PCA-covered contract involves a substantial and
segregable amount of construction work that is subject to the DBA,
employees whose wages are governed by the DBA or FLSA, including those
who qualify for an exemption from the FLSA's minimum wage and overtime
provisions, are covered by the Executive Order for the hours that they
spend performing work on or in connection with such DBA-covered
construction work.
No commenters asked that the Department not exempt contracts
subject to the PCA. EEAC asked for clarification about the Order's
application to a contract for the manufacturing or furnishing of
materials, supplies, articles, or equipment to the Federal Government
for an amount less than $15,000, the threshold amount for PCA coverage.
See 48 CFR 22.602. Because such contracts are not one of the four types
of covered contracts, the Department did not intend for the NPRM to
imply that they could be covered, nor does it intend to cover them in
the Final Rule. To make this point more evident, the text of Sec.
13.3(d) has been slightly modified to indicate that PCA-covered
contracts are an example of contracts for the manufacturing or
furnishing of materials, supplies, articles, or equipment to the
Federal Government rather than to suggest that all such contracts are
PCA-covered.
Coverage of Subcontracts
As explained in the Minimum Wage Executive Order rulemaking, 79 FR
60657-58, the Department proposed that the same test for determining
application of the Executive Order to prime contracts apply to the
determination of whether a subcontract is covered by the Order, with
the distinction that the value threshold requirements set forth in
section 6(e) of the Order do not apply to subcontracts. In other words,
the Department proposed that the requirements of the Order apply to a
subcontract if the subcontract qualifies as a contract or contract-like
instrument under the definition set forth in part 13 and it falls
within one of the four specifically enumerated types of contracts set
forth in section 6(d)(i) of the Order and proposed Sec. 13.3(a)(1).
Under this approach, only covered subcontracts of covered prime
contracts are subject to the requirements of the Executive Order.
Therefore, just as the Executive Order does not apply to prime
contracts for the manufacturing or furnishing of materials, supplies,
articles, or equipment, the Order likewise does not apply to
subcontracts for the manufacturing or furnishing of materials,
supplies, articles, or equipment. In other words, the Executive Order
does not apply to subcontracts for the manufacturing or furnishing of
materials, supplies, articles, or equipment between a manufacturer or
other supplier and a contractor for use on a covered contract. For
example, a subcontract to supply napkins and utensils to a covered
prime contractor operating a fast food restaurant on a military base is
not a covered subcontract for purposes of this Order. The Executive
Order likewise does not apply to contracts under which a contractor
orders materials from a construction materials supplier.
The Chamber/IFA asked in their comment that the Department include
in the Final Rule ``significantly more guidance'' regarding the
definition of ``subcontract.'' Although the Department recognizes that
the NPRM did not include a definition of ``subcontract,'' it notes that
the SCA, DBA, and Minimum Wage Executive Order regulations all also
refer to subcontracts without defining the term. The Department does
not believe it is necessary or appropriate to develop a definition for
the first time here. In this context as under those statutes, it is
generally clear when a contract is a subcontract, such as when a
contractor who enters into a covered contract to build a Federal office
building also enters into a contract with a separate company to install
the windows in that building. It is also generally clear when a
contract is not a subcontract, such as when a contractor who enters
into a covered contract with the Federal Government to build a Federal
office building also enters into a contract with a separate company to
repair the contractor's electronic time system or provide cleaning
services at the contractor's corporate headquarters.
Coverage of Employees
Proposed Sec. 13.3(a)(2) implemented section 6(d)(ii) of Executive
Order 13706, which provides that the paid sick leave requirements of
the Order only apply if the wages of employees under a covered contract
are governed by the DBA, SCA, or FLSA, including employees who qualify
for an exemption from the FLSA's minimum wage and overtime provisions.
80 FR 54699. This coverage provision is distinct from that in Executive
Order 13658 in that the Minimum Wage Executive Order did not cover
employees who qualify for an exemption from the FLSA's minimum wage and
overtime provisions. See 79 FR 9853.
The NPRM explained the Department's interpretation that an
employee's wages are governed by the FLSA for purposes of section
6(d)(ii) of the Executive Order and part 13 if the employee is entitled
to minimum wage and/or overtime compensation under sections 6 and/or 7
of the FLSA or the employee's wages are calculated pursuant to special
certificates issued under section 14 of the FLSA. See 29 U.S.C. 206,
207, 214. No commenter addressed this interpretation, and the
Department reiterates it here.
The Department further interpreted the Order's explicit coverage of
employees who qualify for an exemption from the FLSA's minimum wage and
overtime provisions to mean that the Order and part 13 apply to an
employee who would be entitled to minimum wage and/or overtime
compensation under the FLSA but for the application of an exemption
from the FLSA's minimum wage and overtime requirements pursuant to
section 13 of the Act. See 29 U.S.C. 213. Such employees include those
employed in a bona fide executive, administrative, or professional
capacity as defined in section 13(a)(1) of the FLSA, 29 U.S.C.
213(a)(1), and 29 CFR part 541.
PSC objected to the application of the Order and regulations to
employees who qualify for an exemption from the FLSA's minimum wage and
overtime requirements, asserting that the Department had incorrectly
interpreted the Order to include such workers. The Department disagrees
with the commenter's reading of the Executive Order's text. Section
6(d)(ii) of the Order explains that the paid sick leave requirements
apply to covered contracts on which employees' wages are governed by
the DBA, SCA, and FLSA, ``including employees who qualify for an
exemption from its minimum wage and overtime provisions.'' 80 FR 54699.
Consistent with the Department's interpretation of the analogous
provision in the Minimum Wage Executive Order, this language is best
understood to mean that employees exempt from FLSA requirements are
among the categories of employees who, if they perform work on or in
connection with any covered contract, are entitled to accrue and use
paid sick leave.
EEAC expressed concern that application of the requirements of the
[[Page 67617]]
Executive Order and part 13 to employees who qualify for an exemption
from the FLSA's minimum wage and overtime requirements would create a
risk that the employee could no longer properly be treated as exempt
under the FLSA. Specifically, the commenter worried that if a
contractor tracks such an employee's hours worked for purposes of paid
sick leave accrual or use or if a contractor deducts pay, even if for
less than a full day, under a bona fide plan, policy, or practice of
providing compensation for loss of salary that results from an absence
for which the employee uses paid sick leave, those acts would call into
question whether the employee still qualifies for the FLSA exemptions
described in 29 CFR part 541. The Department has explained in its
guidance regarding 29 CFR part 541, however, that ``[c]ertain common
payroll and recordkeeping practices do not bring into question whether
someone is paid on a salary basis including, e.g., taking deductions
from an exempt employee's accrued leave accounts (regardless of whether
to cover partial-day or full-day absences); requiring exempt employees
to keep track of and/or record their hours worked; requiring exempt
employees to work a specified schedule of hours; and implementing bona
fide, across-the-board changes in schedules.'' FOH ] 22g02(e).
The Department also explained in the NPRM that it interpreted the
Order's reference to employees whose wages are governed by the DBA to
include laborers and mechanics who are covered by the DBA, including
any individual who is employed on a DBA-covered contract and
individually registered in a bona fide apprenticeship program
registered with the Department's Employment and Training
Administration, Office of Apprenticeship, or with a State
Apprenticeship Agency recognized by the Office of Apprenticeship. AGC
asked that the Department exclude laborers and mechanics--i.e., those
workers who must receive prevailing wages pursuant to the DBA--from the
paid sick leave requirements of the Order and part 13. Because section
6(d)(ii) of the Executive Order explicitly refers to employees whose
wages are governed by the DBA, the Department does not believe it would
be appropriate to accept the commenter's suggestion.
The Department also interpreted the language in section 6(d)(ii) of
Executive Order 13706 and proposed Sec. 13.3(a)(2) to extend coverage
to employees performing work on or in connection with DBA-covered
contracts for construction who are not laborers or mechanics but whose
wages are governed by the FLSA as provided above, including those who
qualify for an exemption from the FLSA's minimum wage and overtime
provisions. Although such employees are not covered by the DBA itself
because they are not ``laborers and mechanics,'' 40 U.S.C. 3142(b), the
NPRM noted that such individuals are employees performing work on or in
connection with a contract subject to the Executive Order whose wages
are governed by the FLSA, including those who qualify for an exemption
from the FLSA's minimum wage and overtime provisions, and thus they are
covered by section 6(d) of the Order. 80 FR 54699.
The NPRM further explained that this coverage extends to employees
whose wages are governed by the FLSA, including those who qualify for
an exemption from the FLSA's minimum wage and overtime provisions, who
are working on or in connection with DBA-covered contracts regardless
of whether such employees are physically present on the DBA-covered
construction worksite. MCAA, ABC, and the National Electrical
Contractors Association (NECA) all commented unfavorably on the
application of coverage to employees who work away from the DBA ``site
of the work.'' These commenters are correct that DBA prevailing wages
need only be paid to laborers and mechanics ``employed or working upon
the site of the work,'' 29 CFR 5.5(a)(1), a term that primarily refers
to the ``physical place or places where the building or work called for
in the contract will remain,'' 29 CFR 5.2(k)(1)(1). The Executive Order
applies, however, to DBA-covered contracts and to employees performing
work on or in connection with such contracts, including employees whose
wages are governed by the FLSA, such as employees who perform work away
from the ``site of the work.'' The Minimum Wage Executive Order
rulemaking included the same coverage of employees away from the site
of the work and similarly explained that the Order's text compelled
that result. 79 FR 60658-59.
The Executive Order also refers to employees whose wages are
governed by the SCA. The SCA provides that ``service employees''
directly engaged in providing specific services called for by the SCA-
covered contract are entitled to SCA prevailing wage rates. 41 U.S.C.
6701(3), 6703; 29 CFR 4.152. The Department explained in the NPRM that
these employees are covered by the plain language of section 6(d) of
Executive Order 13706, and that it interpreted this category to include
individuals who are employed on an SCA contract and individually
registered in a bona fide apprenticeship program registered with the
Department's Employment and Training Administration, Office of
Apprenticeship, or with a State Apprenticeship Agency recognized by the
Office of Apprenticeship. The Department received no comments regarding
this interpretation.
The NPRM also noted that under the SCA, ``service employees'' who
do not perform the services required by an SCA-covered contract but
whose duties are ``necessary to performance of the contract'' must be
paid at least the FLSA minimum wage. 29 CFR 4.153; see also 41 U.S.C.
6704(a). The Department proposed to interpret the language in section
6(d)(ii) of Executive Order 13706 and proposed Sec. 13.3(a)(2) to
extend coverage to this category of employee. It offered as an example
an accounting clerk who processes invoices and work orders on an SCA-
covered contract for janitorial services; such an employee would likely
not qualify as performing services required by the contract (and
therefore would not be entitled to SCA prevailing wages), but the clerk
would be entitled to at least the FLSA minimum wage. Therefore, the
clerk would be covered by the Executive Order. The Department did not
receive comments regarding this interpretation.
The Department further noted in the NPRM that some employees
perform work on or in connection with SCA-covered contracts but are not
``service employees'' for purposes of the Act because that term does
not include an individual employed in a bona fide executive,
administrative, or professional capacity, as those terms are defined in
the FLSA regulations at 29 CFR part 541. 41 U.S.C. 6701(3)(C). The
Department proposed to cover these employees under section 6(d)(ii) of
the Executive Order. For example, a contractor could employ a manager
who meets the test for the executive employee exemption under 29 U.S.C.
213(a)(1) and 29 CFR 541.100 to supervise janitors on an SCA-covered
contract for cleaning services at a Federal building. Because that
manager performs work on or in connection with a covered contract and
qualifies for an exemption from the FLSA's minimum wage and overtime
provisions, she would be entitled to paid sick leave as required by
Executive Order 13706 and part 13. The Department did not receive
comments specifically regarding this explanation, and because it is
declining to adopt the suggestion of commenters who asked that part 13
not apply to employees who qualify for an
[[Page 67618]]
exemption from the FLSA's minimum wage and overtime requirements, it
also need not make any amendment to this discussion.
The NPRM included the interpretation that where State or local
government employees are performing work on or in connection with
covered contracts and their wages are governed by the SCA or the FLSA,
including employees who qualify for an exemption from the FLSA's
minimum wage and overtime provisions, such employees are entitled to
the protections of the Executive Order and part 13. The Department
received no comments on this issue and reiterates its position here. As
noted in the NPRM, the DBA does not apply to construction performed by
State or local government employees.
The Department received additional comments addressing the scope of
coverage of employees. The U.S. Small Business Administration's Office
of Advocacy (SBA Advocacy) asked whether employees who are part-time,
seasonal, immigration visa holders, or students are covered by the
Order and part 13. If those employees perform work on or in connection
with covered contracts and their wages are governed by the DBA, SCA, or
FLSA, including if they qualify for an exemption from the FLSA's
minimum wage and overtime requirements, then they would be covered and
entitled to paid sick leave as required by the Order and part 13. The
ability of part-time and seasonal workers to accrue and use paid sick
leave would be limited, but not eliminated, by their shorter work
schedules. No special rules apply to non-citizens or students for
purposes of this rulemaking. The U.S. Women's Chamber of Commerce asked
that the paid sick leave requirements be extended to all private-sector
employees. Although the Department appreciates that many workers do not
have and would benefit from paid sick time, its authority to require
employers to provide this benefit extends only to employees working on
or in connection with contracts covered by the Executive Order.
On or In Connection With
As proposed, the paid sick leave requirements of Executive Order
13706 and part 13 apply to employees performing work ``on or in
connection with'' covered contracts. As it had in the Minimum Wage
Executive Order rulemaking, see 79 FR 60671-72, the Department proposed
to interpret these terms in a manner consistent with SCA regulations,
see, e.g., 29 CFR 4.150-4.155. In the Final Rule, the Department
reiterates these interpretations, which it is including in the
definition of employee in Sec. 13.2 for purposes of clarity.
Specifically, the Department explained in the NPRM that employees
performing ``on'' a covered contract are those employees directly
performing the specific services called for by the contract, and
whether an employee is performing ``on'' a covered contract would be
determined, as explained in the Minimum Wage Executive Order Final
Rule, 79 FR 60660, in part by the scope of work or a similar statement
set forth in the covered contract that identifies the work (e.g., the
services or construction) to be performed under the contract. Under
this approach, all laborers and mechanics engaged in the construction
of a public building or public work on the site of the work will be
regarded as performing ``on'' a DBA-covered contract, and all service
employees performing the specific services called for by an SCA-covered
contract will also be regarded as performing ``on'' a contract covered
by the Executive Order. In other words, any employee who is entitled to
be paid DBA or SCA prevailing wages would necessarily be performing
``on'' a covered contract. For purposes of concessions contracts and
contracts in connection with Federal property or lands and related to
offering services for Federal employees, their dependents, or the
general public that are not covered by the SCA, the Department would
regard any employee performing the specific services called for by the
contract as performing ``on'' the covered contract.
The Department further noted in the NPRM that it would consider an
employee performing ``in connection with'' a covered contract to be any
employee who is performing work activities that are necessary to the
performance of a covered contract but who is not directly engaged in
performing the specific services called for by the contract itself. For
example, any employees who are not DBA-covered laborers or mechanics
but whose services are necessary to the performance of the DBA
contract, such as employees who do not directly perform the
construction identified in the DBA contract either due to the nature of
their non-physical duties and/or because they are not present on the
site of the work, would necessarily be performing ``in connection
with'' a covered contract. This standard, also articulated in the
Minimum Wage Executive Order rulemaking, was derived from SCA
regulations. See 79 FR 60659 (citing 29 CFR 4.150-4.155).
Several commenters addressed this topic. The Small Business
Legislative Council (SBLC) and Vigilant suggested that the Department
not cover employees working ``in connection with'' a covered contract,
instead limiting coverage to those employees working ``on'' covered
contracts. The Department has considered these comments but is not
accepting the commenters' suggestion for several reasons. First, the
Executive Order's purpose is best fulfilled by extending its coverage
to a broader set of employees whose work contributes to fulfillment of
Federal contracts than only those who are directly engaged in
performing the specific services called for by a covered contract.
Furthermore, section 6(d) provides that an employee whose wages are
governed by the FLSA, including an employee who qualifies for an
exemption from the FLSA's minimum wage and overtime provisions, is
covered regardless of which type of covered contract the employee's
work is performed under--and the employees whose wages are governed by
the FLSA under an SCA-covered contract are those who work ``in
connection with'' such contracts. Finally, the coverage of employees
working ``in connection with'' covered contracts is consistent with the
Department's interpretation in the Minimum Wage Executive Order
rulemaking. 79 FR 60659-60. SBLC, the American Benefits Council,
Chamber/IFA, and the National Association of Manufacturers (NAM) all
asked that the Department explain in greater detail which employees
would be considered to work ``in connection with'' covered contracts.
Specifically, some of these commenters wanted to know whether a human
resources professional involved in the process of recruiting,
interviewing, and/or hiring employees who perform on covered contracts
would be included. Because finding employees to perform the work of a
contract is necessary to the performance of the contract, such an
employee would be working ``in connection with'' the contract for which
he was performing such services and, if employed by the contractor,
would be entitled to paid sick leave unless the exception described
below applies. Similarly, an administrative assistant to an employee
who manages the work of a contract could be working ``in connection
with'' that contract depending on his duties. For example, if the
assistant orders supplies the manager determines her subordinates need
to complete the project, such tasks would be ``in connection with'' the
contract because they are necessary to the performance of
[[Page 67619]]
the contract; on the other hand, if the assistant schedules the
manager's meetings regarding private contracts or orders supplies to be
used in the completion of private contracts, that work would not be
``in connection with'' the contract.
MCAA requested clarification of whether a construction contractor's
off-site fabrication shop employees would be regarded as performing
work ``in connection with'' a covered contract. Such employees would be
performing work ``in connection with'' a covered contract to the extent
their services are necessary to the performance of the contract.
Methods of calculating or estimating the portion of such employees'
hours worked in connection with covered contracts is discussed below,
particularly in the discussion of Sec. 13.5(a)(1)(i). As MCAA notes,
however, employees performing under contracts for the manufacturing or
furnishing of materials, supplies, articles, or equipment to the
Federal Government that are subject to the Walsh-Healey Public
Contracts Act, 41 U.S.C. 6501 et seq., would not be covered by the
Executive Order or part 13 because such contracts are not one of the
four types of covered contracts under the Executive Order.
The Department notes that it has included in this Final Rule, as it
did in the Minimum Wage Executive Order rulemaking, an exception from
coverage for employees who spend a minimal amount of time--less than 20
percent in a workweek--working in connection with covered contracts.
(Comments regarding that exclusion, which appears in Sec. 13.4(e), are
addressed in the discussion of it below.) In other words, the exclusion
would apply to an employee who spends only minimal amounts of time
performing tasks necessary to the performance of covered contracts--
such as if the human resources professional described above interviews
two people to work on a covered contract during a workweek in which he
interviews 20 people for jobs on a private contract, or if the
assistant places a single order for supplies in a workweek in which he
spends the remainder of his worktime performing duties related to
private contracts. In addition, this analysis occurs on a workweek-by-
workweek basis, so if the human resources professional spends most of
his time for 2 weeks hiring workers for a covered contract and then the
contractor for which he works takes on no new covered contract for 6
months, the contractor would only have to permit him to accrue paid
sick leave for those 2 weeks. If at some point during the 6 months, one
employee on the covered contract quit and the human resources
professional spent 2 hours of his 40-hour workweek sorting through
resumes to find a potential replacement, although he performed work in
connection with a covered contract, the 20 percent exclusion would
apply and he would not need to be permitted to accrue paid sick leave
during that workweek.
The Department noted in the NPRM and reiterates here that the Order
does not extend to employees who are not engaged in working on or in
connection with a covered contract. For example, a technician who is
hired to repair a DBA contractor's electronic time system or a janitor
who is hired to clean the bathrooms at the DBA contractor's company
headquarters are not covered by the Order because they are not
performing the specific duties called for by the contract or other
services or work necessary to the performance of the contract.
Similarly, the Executive Order would not apply to a landscaper at the
home office of an SCA contractor because that employee is not
performing the specific duties called for by the SCA contract or other
services or work necessary to the performance of the contract. And the
Executive Order would not apply to an employee hired by a covered
concessionaire to redesign the storefront sign for a snack shop in a
National Park unless the redesign of the sign was called for by the
concessions contract itself or otherwise necessary to the performance
of the contract.
The Department noted in the NPRM and repeats here that because the
Order and part 13 do not apply to employees of Federal contractors who
do no work on or in connection with a covered contract, a contractor
could be required to provide paid sick leave to some of its employees
but not others; in other words, it is not the case that because a
contractor has one or more Federal contracts, all of its employees or
projects are covered.
Geographic Scope
Proposed Sec. 13.3(c), which was identical to 29 CFR 10.3(c) as
promulgated in the Minimum Wage Executive Order Final Rule, see 79 FR
60723, provided that Executive Order 13706 and part 13 would only apply
to contracts with the Federal Government requiring performance in whole
or in part within the United States. This interpretation was reflected
in the Department's proposed definition of the term United States,
which provided that when used in a geographic sense, the United States
means the 50 States and the District of Columbia. The Department
received no comments on this issue.
Accordingly, the requirements of the Order and part 13 do not apply
to contracts with the Federal Government to be performed in their
entirety outside the geographical limits of the United States as thus
defined. If a contract with the Federal Government is to be performed
in part within and in part outside these geographical limits and is
otherwise covered by the Executive Order and part 13, however, the
requirements of the Order and part 13 would apply with respect to that
part of the contract that is performed within the United States, i.e.,
employees would accrue paid sick leave based on their hours worked on
or in connection with covered contracts within the United States, and
would likewise be entitled to use accrued paid sick leave while
performing work on or in connection with a covered contract within the
United States.
As noted in the NPRM, as with other instances described below in
which employees perform some work covered by the Executive Order and
part 13 and other work that is not, or if some employees working on or
in connection with a covered contract do so in the United States and
others do so outside the United States, a contractor wishing to comply
with the Order's paid sick leave requirements as to only some employees
on a contract or only some of an employee's hours worked must keep
records adequately segregating non-covered work from covered work. If a
contractor does not make and maintain such records, in the absence of
other proof regarding the nature or location of the work, all of the
employees' hours worked and/or all of the employees working on or in
connection with the covered contract will be presumed to be covered by
the Order and part 13.
Section 13.4 Exclusions
Proposed Sec. 13.4 set forth exclusions from the Executive Order's
requirements, including by implementing the exclusions set forth in
section 6(f) of the Order and creating other limited exclusions from
coverage as authorized by section 3(a) of the Executive Order. See 80
FR 54698, 54700. Specifically, proposed Sec. 13.4(a) through (d)
described the limited categories of contractual arrangements with the
Federal Government for services or construction excluded from the paid
sick leave requirements of the Executive Order and part 13, and
proposed Sec. 13.4(e) established a narrow category of employees that
are excluded from coverage of the Order and part 13. For the reasons
explained below, the
[[Page 67620]]
Department adopts these provisions as proposed and adds a new,
temporary exclusion for a particular category of employees.
Proposed Sec. 13.4(a) implemented the statement in section 6(f) of
Executive Order 13706 that the Order does not apply to ``grants.'' 80
FR 54700. As it did in the Minimum Wage Executive Order rulemaking, see
79 FR 60665-66, the Department interpreted this provision to mean that
the paid sick leave requirements of the Executive Order and part 13 do
not apply to grants as that term is used in the Federal Grant and
Cooperative Agreement Act, 31 U.S.C. 6301 et seq. That statute defines
a ``grant agreement'' as ``the legal instrument reflecting a
relationship between the United States Government and a State, a local
government, or other recipient when--(1) the principal purpose of the
relationship is to transfer a thing of value to the State or local
government or other recipient to carry out a public purpose of support
or stimulation authorized by a law of the United States instead of
acquiring (by purchase, lease, or barter) property or services for the
direct benefit or use of the United States Government; and (2)
substantial involvement is not expected between the executive agency
and the State, local government, or other recipient when carrying out
the activity contemplated in the agreement.'' 31 U.S.C. 6304. Section
2.101 of the FAR similarly excludes ``grants,'' as defined in the
Federal Grant and Cooperative Agreement Act, from its coverage of
contracts. 48 CFR 2.101.
Several appellate courts have also adopted this construction of
``grants'' in defining the term for purposes of other Federal statutory
schemes. See, e.g., Chem. Service, Inc. v. Environmental Monitoring
Systems Laboratory, 12 F.3d 1256, 1258 (3rd Cir. 1993) (applying same
definition of ``grants'' for purposes of 15 U.S.C. 3710a); East
Arkansas Legal Services v. Legal Services Corp., 742 F.2d 1472, 1478
(D.C. Cir. 1984) (applying same definition of ``grants'' in
interpreting 42 U.S.C. 2996a). Under the proposed provision, if a
contract qualified as a grant within the meaning of the Federal Grant
and Cooperative Agreement Act, it would be excluded from coverage of
Executive Order 13706 and part 13. No commenter requested a change to
this provision, and it is adopted as proposed.
Proposed Sec. 13.4(b) implemented the other exclusion set forth in
section 6(f) of Executive Order 13706, which states that the Order does
not apply to ``contracts and agreements with and grants to Indian
Tribes under the Indian Self-Determination and Education Assistance Act
(Pub. L. 93-638), as amended.'' 80 FR 54700. The proposed provision was
identical to 29 CFR 10.4(b) as promulgated by the Minimum Wage
Executive Order. See 79 FR 60723. Elk Valley Rancheria asked that the
Department expand this provision to exclude from the Order and part
13's coverage all contracts, agreements, and grants with Indian tribes.
Because this provision was based on language included in the Executive
Order that excludes only a subset of contracts and agreements with
Indian Tribes and because expanding the exemption would not advance the
Order's goal of ensuring that employees working on or in connection
with other types of covered contracts have access to paid sick leave,
the Department adopts Sec. 13.4(b) as proposed.
Proposed Sec. 13.4(c) provided that any procurement contracts for
construction that are not subject to the DBA are excluded from coverage
of the Executive Order and part 13. The proposed provision was
identical to 29 CFR 10.4(c) as promulgated by the Minimum Wage
Executive Order Final Rule. See 79 FR 60723. The Department proposed to
make coverage of construction contracts under the Executive Order and
part 13 consistent with coverage under the DBA in order to assist all
interested parties in understanding their rights and obligations under
Executive Order 13706. The Department received no comments addressing
this provision and adopts it as proposed.
Similarly, proposed Sec. 13.4(d) incorporated the SCA's exemption
of certain service contracts into the exclusionary provisions of the
Executive Order. The proposed provision excluded from coverage of the
Executive Order and part 13 any contracts for services, except for
those expressly covered by Sec. 13.3(a)(1)(iii) or (iv), that are
exempted from coverage under the SCA, pursuant to its statutory
language at 41 U.S.C. 6702(b) or its implementing regulations,
including those at 29 CFR 4.115 through 4.122 and 29 CFR 4.123(d) and
(e). The Department's proposal noted that this exemption would not
apply if the relevant service contract is expressly included within the
Executive Order's coverage by Sec. 13.3(a)(1)(iii) or (iv). For
example, certain types of concessions contracts are excluded from SCA
coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by
section 6(d)(i)(C) of the Executive Order and part 13 under Sec.
13.3(a)(1)(iii). Based on the Department's decision with regard to the
Order's coverage of service contracts described above, the Department
is adopting this provision as proposed.
Several commenters asked that the Department add additional
exclusions for certain types of contracts or contractors. The America
Outdoors Association and River Riders asked that the Department exclude
businesses that receive two-thirds of their revenues over 6 months of
the year (and one-third over the remaining 6 months) and/or businesses
whose employees work less than 4 or 6 months per year. These commenters
asserted that it would be difficult to document the hours of employees
who work in wilderness settings and that the costs of compliance with
the Executive Order would be particularly high for seasonal businesses.
River & Trail Outfitters also asked that the Department create
exemptions for seasonal recreational businesses. After considering
these comments, the Department has decided not to grant these requests.
No such exemption was included in the Minimum Wage Executive Order
rulemaking, and the intent of Executive Order 13706 is best fulfilled
by extending its coverage broadly. The Department also notes that the
burdens of the Executive Order and part 13 on these contractors will be
limited because to the extent employees of these businesses must be
paid according to the FLSA or SCA, these contractors are already
required to keep records of the employees' hours worked, and to the
extent they are exempt from the FLSA's minimum wage and overtime
requirements pursuant to 29 U.S.C. 213(a)(3), 29 U.S.C. 213(b)(29), or
any other FLSA provision, these contractors may avoid the burden of
tracking hours worked by using the approximation permitted by Sec.
13.5(a)(1)(iii).
Koga Engineering and Construction, Royal Contracting Company, and
the General Contractors Association of Hawaii requested that the
Department exempt employers with 50 or fewer employees from the
requirements of the Order and part 13, asserting that smaller
contractors will not be able to afford the new systems necessary to
segregate time employees work on DBA-covered contracts from other
contracts. Although the Department is sensitive to the concerns of
small businesses, it believes it is most appropriate not to grant this
request. Under this rulemaking, prime contracts that do not meet the
SCA, DBA, or 41 U.S.C. 1902(a) thresholds are excluded from coverage
pursuant to a provision in the Executive Order itself, and the size of
the contractor is not relevant to coverage. Furthermore, although the
Department understands that small employers may not be able to afford
expensive systems, the
[[Page 67621]]
Department believes employers can use less expensive means for tracking
time, just as smaller contractors may use such means to comply with the
SCA, DBA, and FLSA.
Delta Air Lines (Delta) urged the Department to include an express
exception for contracts with air carriers, asserting that application
of the Order would be complicated in the airline industry and noting
that its employees already receive paid sick leave. As Airlines for
America (A4A) noted in its comment, many contracts with air carriers
are already outside of the scope of the Order's coverage because they
are exempted from the SCA by regulation. And to the extent some such
contracts are covered, airlines' existing paid sick time policies may
satisfy the requirements of the Order or airline employees may perform
a sufficiently small amount of work in connection with such contracts
that the exemption created by Sec. 13.4(e) applies. For these reasons,
the Department is not exempting air carriers from the Order and part
13.
The Association of American Railroads (AAR) similarly asked the
Department to exempt contracts with entities that are employers for
purposes of the Railroad Unemployment Insurance Act, 45 U.S.C. 351 et
seq., from the Executive Order's requirements, noting that most
contracts for rail services are SCA-exempt and asserting that it would
be extremely difficult to segregate time railroad employees spend
working on covered and non-covered contracts. For reasons analogous to
those described with respect to the airline industry--many contracts
are already excluded from the Order's coverage and some employees
already receive paid sick time or would not be entitled to paid sick
leave, and the Department is not persuaded that application of the
Order is inappropriate in other circumstances--the Department has
decided not to adopt this suggestion.
An individual commenter, Anthony Pannone, contended that the
Department should interpret the Executive Order to apply only to
contracts under which the contractor receives payment from the Federal
Government, and that the Department therefore should exempt contractors
that pay rent to, rather than receive appropriated funds from, the
Federal Government. The Department declines to adopt this proposed
exemption because it is inconsistent with section 6(d) of the Executive
Order, which makes clear that the Executive Order applies to contracts
that do not involve the payment of appropriated funds, including
nonprocurement contracts covered by the SCA and contracts for
concessions. Moreover, no such exemption was included in the Minimum
Wage Executive Order rulemaking, and the intent of Executive Order
13706 is best fulfilled by extending its coverage broadly.
Vigilant sought clarification regarding whether the Department
intended to cover a contract for the sale of timber by the Federal
Government, the principal purpose of which is the harvesting and
purchase of timber by the contractor but which also includes such
incidental activities as building roads to access the timber, gathering
debris for later burning or removal, and replanting the harvested
areas. Application of the paid sick leave requirements to such a
contract will depend, as it does for all other contracts, upon whether
they are covered contracts under the Order and part 13--that is,
whether they are one of the four types of contracts described in Sec.
13.3(a)(1). To the extent such a contract is subject to the SCA or the
DBA, it would be covered under Executive Order 13706. The Department
also notes, however, that ``[s]o-called timber sales contracts
generally are not subject to the [SCA] because normally the services
provided under such contracts are incidental to the principal purpose
of the contracts.'' 29 CFR 4.131(f) (citations omitted); see also Am.
Fed'n of Labor & Cong. of Indus. Organizations v. Donovan, 757 F.2d
330, 345-56 (D.C. Cir. 1985) (citing 48 FR 49736, 49751-52 (1983)).
The NPRM also addressed exemptions for categories of employees
rather than contracts. Specifically, proposed Sec. 13.4(e) provided
that the accrual requirements of part 13 do not apply to employees
performing work in connection with covered contracts, i.e., those
employees who perform work duties necessary to the performance of the
contract but who are not directly engaged in performing the specific
work called for by the contract, who spend less than 20 percent of
their hours worked in a particular workweek performing work in
connection with such contracts. It further provided that this exclusion
is inapplicable to employees performing work on covered contracts,
i.e., those employees directly engaged in performing the specific work
called for by the contract, at any point during the workweek. Finally,
it explained that this exclusion is also inapplicable to employees
performing work in connection with covered contracts with respect to
any workweek in which the employees spend 20 percent or more of their
hours worked performing work in connection with a covered contract.
This proposed provision adopted language included in the Minimum
Wage Executive Order Final Rule in response to comments expressing
concern about new burdens on contractors associated with employees who
spend an insubstantial amount of time performing work in connection
with covered contracts (in particular, DBA-covered contractors that did
not previously segregate hours worked by FLSA-covered employees,
including those who were not present on the site of the construction
work). 79 FR 60659, 60724 (codified at 29 CFR 10.4(f)). The Department
explained in that rulemaking that it expected the exclusion to
significantly mitigate the recordkeeping concerns identified by
commenters without substantially affecting the Executive Order's
economy and efficiency interests, and noted that it has used a 20
percent threshold for other purposes in the SCA and DBA contexts. 79 FR
60660 (citing 29 CFR 4.123(e)(2); FOH ]] 15e06, 15e10(b), 15e16(c), and
15e19).
SBLC asked that the Department modify the Sec. 13.4(e) exclusion
to apply to employees performing work in connection with covered
contracts who spend less than 50, rather than 20, percent of their
hours worked in a particular workweek performing work in connection
with such contracts. The Department has decided not to adopt this
suggestion. This exclusion was intended to relieve contractors from
potential burden without depriving employees who would otherwise be
entitled to accrue and use meaningful amounts of paid sick leave--as
would be the case for employees who spend a significant portion of
their work time performing covered work--of that benefit. Finally, as
noted, this provision is based on an exclusion included in the Minimum
Wage Executive Order Final Rule, and the Department believes it would
cause confusion to have different tolerances in these otherwise
identical provisions that will be applied to many of the same
employees. Accordingly, the Department adopts the provision as proposed
and reiterates the discussion in the NPRM regarding how the provision
will operate.
As explained in the NPRM, like the exclusion created for purposes
of the Minimum Wage Executive Order rulemaking, 79 FR 60659-62, this
exclusion will not apply to any employee performing ``on,'' rather than
``in connection with,'' a covered contract at any point during the
workweek. If an employee spends any time performing work on a covered
[[Page 67622]]
contract in a workweek and that employee's wages are governed by the
DBA, SCA, or FLSA, including employees who qualify for an exemption
from the FLSA's minimum wage and overtime provisions, the employee will
be entitled to accrue and use paid sick leave pursuant to the Executive
Order as to all time performing work on or in connection with covered
contracts in that workweek. For an employee solely performing ``in
connection with'' a covered contract, however, the Executive Order's
paid sick leave accrual requirements will only apply if that employee
spends 20 percent or more of her hours worked in a given workweek in
connection with covered contracts. Therefore, in order to apply this
exclusion correctly, contractors must accurately distinguish between
employees performing ``on'' a covered contract and those employees
performing ``in connection with'' a covered contract. As explained
above, employees directly performing the specific services called for
by the contract are performing work ``on'' a covered contract. This
category includes any employee who is entitled to be paid DBA or SCA
prevailing wages, regardless of whether such covered work constitutes
less than 20 percent of the employee's overall hours worked in a
particular workweek.
This exclusion could apply, however, to any employees who are not
directly engaged in performing the specific construction identified in
a DBA contract (i.e., they are not DBA-covered laborers or mechanics)
but whose services are necessary to the performance of the DBA
contract, such as employees who do not directly perform the
construction identified in the DBA contract either due to the nature of
their non-physical duties and/or because they are not present on the
site of the work, but whose duties would be regarded as essential for
the performance of the contract. For example, Sec. 13.4(e) could apply
to a security guard patrolling or monitoring a construction worksite
where DBA-covered work is being performed or a clerk who processes the
payroll for DBA contracts (either on or off the site of the work). If
the security guard or clerk also performed the duties of a DBA-covered
laborer or mechanic (for example, by painting or moving construction
materials), however, the exclusion would not apply to any hours worked
on or in connection with the contract in that workweek because that
employee performed ``on'' the covered contract at some point in the
workweek.
Similarly, any employees performing work in connection with an SCA
contract who are not entitled to SCA prevailing wages but are, because
they perform work ``in connection with'' an SCA-covered contract,
entitled to at least the FLSA minimum wage could fall within the scope
of the exclusion provided their work falls below the 20 percent
threshold. For example, the exclusion could apply to an accounting
clerk who processes a few invoices for SCA contracts out of hundreds of
other invoices for non-covered contracts during the workweek or a human
resources employee who assists for short periods of time in the hiring
of the employees performing work on the SCA-covered contract in
addition to the hiring of employees on other non-covered projects.
With respect to concessions contracts and contracts in connection
with Federal property or lands and related to offering services, the
Sec. 13.4(e) exclusion could apply to any employees performing work in
connection with such contracts who are not at any time directly engaged
in performing the specific services identified in the contract but
whose services or work duties are necessary to the performance of the
covered contract. One example of an employee who could qualify for this
exclusion is a clerk who handles the payroll for a child care center
that leases space in a Federal building as well as the center's other
locations that are not covered by the Executive Order and thus does not
spend 20 percent or more of his time handling payroll for the child
care center in the Federal building.
Importantly, as noted in the NPRM and the Minimum Wage Executive
Order rulemaking, 79 FR 60661-62, a contractor seeking to rely on this
exclusion must correctly determine the hours worked, make and maintain
records (or have other affirmative proof) that the employee did not
work ``on'' a covered contract, and appropriately segregate the hours
worked by the employee in connection with the covered contract from
other work not subject to the Executive Order. A contractor may apply
this exception on the basis of an estimate of the employee's work time
in connection with covered contracts, as discussed in more detail with
respect to the final text of Sec. 13.5(a)(1)(i), but in that case, the
estimate must be reasonable and based on verifiable information. In the
absence of records or other proof demonstrating that an employee did
not work ``on'' a covered contract and adequately segregating non-
covered work from the work performed in connection with a covered
contract (or proof that the estimate of the employee's work time in
connection with covered contracts is reasonable and based on verifiable
information), the exclusion will not apply, and employees who work in
connection with a covered contract will be presumed to have spent all
work time performing such work throughout the workweek.
The quantum of affirmative proof necessary to support reliance on
the exclusion will vary with the circumstances. For example, it may
require considerably less affirmative proof to satisfy the Sec.
13.4(e) exclusion with respect to an accounting clerk who only
occasionally processes an SCA-contract-related invoice than would be
necessary to establish the exclusion with respect to a security guard
who works on a DBA-covered site for at least several hours each week.
Finally, as noted in the discussion of this exclusion in the NPRM,
in calculating hours worked by a particular employee in connection with
covered contracts for purposes of determining whether this exclusion
may apply, contractors must determine the aggregate amount of hours
worked on or in connection with covered contracts in a given workweek
by that employee. For example, if an administrative assistant works for
a single employer 40 hours per week and spends 2 hours each week
handling payroll for each of four separate SCA contracts, the 8 hours
that the employee spends performing work in connection with the four
covered contracts must be aggregated for each workweek in order to
determine whether the exclusion applies. In this case, the exclusion
would not apply because the employee's hours worked in connection with
the SCA contracts constitute 20 percent of her total hours worked for
that workweek. As a result, the 8 hours that the employee spends
performing work in connection with the four covered contracts each
workweek would count toward the accrual of paid sick leave.
The Department also received several requests regarding the
application of Executive Order 13706 and part 13 to employees
performing work on or in connection with covered contracts whose
conditions of employment are governed by a CBA. Seyfarth Shaw suggested
exempting a contract from the Executive Order's requirements if a CBA
applies to the work performed under the contract; the American Benefits
Council and the Chamber/IFA suggested exempting a contract from the
Executive Order's requirements if a CBA that provides for at least 7
days of paid sick time applies to the work performed
[[Page 67623]]
under the contract; the AFL-CIO as well as the Chamber/IFA suggested
exempting a contract from the Executive Order's requirements if a CBA
applies to the work performed under the contract until after the
current CBA expires, so that negotiations taking the Executive Order
into account can occur; and Seyfarth Shaw offered as an alternative
exempting a contract from the Executive Order's requirements if a CBA
that explicitly waives the rights in the Executive Order applies to the
work performed under the contract. Other commenters, such as the Sheet
Metal and Air Conditioning Contractors' National Association (SMACNA)
and MCAA, also suggested exempting contracts to which CBAs apply, but
only with respect to narrower sets of construction contracts.
After careful consideration of these comments, the Department has
included a new, temporary exclusion from the requirements of the Order
and part 13 for employees whose work is governed by certain CBAs.
Specifically, the new provision, Sec. 13.4(f), provides that if a CBA
ratified before September 30, 2016 applies to an employee's work
performed on or in connection with a covered contract and provides the
employee with at least 56 hours (or 7 days) of paid sick time (or paid
time off that may be used, among other purposes, for reasons related to
sickness or health care) each year, the requirements of the Executive
Order and part 13 do not apply to the employee until the earlier of the
date the agreement terminates or January 1, 2020. This provision
balances the importance of ensuring that the Executive Order applies to
all employees entitled to its benefits promptly against the
complications that could arise where an existing CBA provides for paid
sick time in a manner that is similar to, but not sufficient to meet
the requirements of, the paid sick leave provisions of part 13. These
complications are significant in circumstances involving CBAs because
the agreement will limit a contractor's ability to unilaterally change
the terms of the leave it requires to be provided. Similarly, the new
Sec. 13.4(f) provides that if a CBA ratified before September 30, 2016
applies to an employee's work performed on or in connection with a
covered contract and provides the employee with paid sick time (or paid
time off that may be used, among other purposes, for reasons related to
sickness or health care) each year, but the amount provided under the
CBA is less than 56 hours (or 7 days, if the CBA refers to days rather
than hours), the contractor must provide covered employees with the
difference between 56 hours (or 7 days) and the amount provided under
the existing CBA. For example, if a CBA ratified before September 30,
2016 applies to an employee's work performed on or in connection with a
covered contract and provides the employee with 20 hours of paid sick
time each year, the contractor, in order to avail itself of the Sec.
13.4(f) exemption, would be required under this Final Rule to allow the
employee to accrue and use an additional 36 hours of paid sick time in
that year, for a total of 56 hours. A contractor must provide such
``top up'' leave in a manner consistent with either the provisions of
the Executive Order and part 13 or the terms and conditions of its CBA.
If a CBA does not provide any paid sick time (or paid time off that
could be used for an unlimited or broader range of reasons than paid
sick time, but including reasons related to being sick or seeking
health care), a contractor will be responsible for full compliance with
the Order and part 13 pursuant to the effective date of this rule and
the definition of a ``new contract.''
This temporary exclusion applies to employees rather than contracts
because on any covered contract, some employees' work might be governed
by a CBA while others' work is not. For example, laborers and mechanics
working on a DBA contract might be members of a union that has
negotiated a CBA with the contractor, but the administrative staff
performing work in connection with the contract might not be covered by
the CBA. Or a CBA could apply to janitors working on an SCA contract
but not their supervisor. As to employees to whom a CBA does not apply,
a contractor must provide access to paid sick leave without reliance on
this exception.
In addition, the temporary exclusion applies to any paid sick time
policy or other paid time off policy under a CBA that allows employees
to take leave for reasons related to sickness or health care. Such
policies need not permit employees to be absent for all of the reasons
required under Sec. 13.5(c)(1); for example, if a paid sick time
policy under a CBA allowed an employee to use leave if she is sick but
not to care for family members, or if a paid sick time policy does not
permit leave for reasons related to domestic violence, sexual assault,
or stalking other than seeking health care, the exclusion can still
apply. Adjustments to the reasons for which an employee may use paid
leave are among those changes that a contractor that is party to a CBA
might be unable to make unilaterally.
Finally, the Department notes it has included a date--January 1,
2020--by which all contractors taking advantage of this limited
exception must come into compliance with the paid sick leave
requirements regardless of whether an applicable CBA has yet
terminated. The Department believes delaying the application of the
Executive Order by more than 3 years after the effective date of this
rulemaking, which could occur if a CBA with an extended term is in
place, is inappropriate, and parties to the CBA will have 3 full years
to take any actions necessary to prepare for compliance.
SHRM/CUPA-HR also asked in their comment for a different exception
for certain employees. They requested that the Department exclude
graduate research assistants, i.e., students who perform research under
grants or contracts as part of the pursuit of an advanced degree, from
the requirements of the Order and part 13, asserting that it would be
problematic to cover these workers because it would be difficult to
segregate their covered and non-covered hours worked. The Department
does not believe a provision specific to graduate research assistants
is necessary or appropriate in this context. Application of the paid
sick leave requirements to such assistants will depend, as it does for
all other workers, upon whether they meet the definition of employee
under part 13--that is, whether their wages are governed by the SCA,
DBA, or FLSA, including if they qualify for an exemption from the
FLSA's minimum wage and overtime requirements--and are performing work
on or in connection with a covered contract. Graduate research
assistants, whether or not they qualify as employees as defined for
purposes of the Order, may often perform work on or in connection with
Federal grants that are excluded from the Order's coverage. To the
extent such assistants' work is covered by the Order and part 13 and
therefore the commenters' concern about segregating time is relevant,
the Department notes that it has created additional flexibility for
contractors who would have difficulty segregating the covered and non-
covered hours worked of employees who perform work in connection with
covered contracts, as described in the discussion of Sec. 13.5(a)(1)
below.
The Department noted in the NPRM that the Minimum Wage Executive
Order rulemaking contained additional exclusions for certain categories
of employees that were not replicated in the proposed rule.
Specifically, under the Minimum Wage Executive Order regulations,
employees whose wages are not governed by section 206(a)(1) of the
[[Page 67624]]
FLSA because of the applicability of exemptions under section 213(a)
are not entitled to the protections of Executive Order 13658. 29 CFR
10.4(e)(3). For the reasons explained in the discussion of coverage of
employees above, no such exclusion exists in this rulemaking.
Additionally, the Minimum Wage Executive Order does not apply to
employees whose wages are calculated pursuant to special certificates
issued under 29 U.S.C. 214(a) or (b), 29 CFR 10.4(e)(1), (2), but the
Department did not propose to incorporate an exclusion for any such
employees in the proposed rule under this Order. The NPRM explained
that because it interpreted Executive Order 13706 to be intended to
apply to a broad range of employees, the Order explicitly applies to
employees whose wages are governed by the FLSA, and the Order (unlike
the Minimum Wage Executive Order) contains no reference to any category
of employees whose wages are calculated pursuant to special
certificates, it proposed to interpret Executive Order 13706 to apply
to all employees whose wages are calculated pursuant to special
certificates under section 14 of the FLSA. No commenter asked that the
Department exclude employees whose wages are calculated pursuant to
special certificates issued under 29 U.S.C. 214(a) or (b), and
therefore no such provision is adopted.
Section 13.5 Paid Sick Leave for Federal Contractors and Subcontractors
Proposed Sec. 13.5 implemented section 2 of Executive Order 13706
by setting forth rules and restrictions regarding the accrual and use
of paid sick leave. It is adopted in significant part as proposed but
with modifications in response to comments as described below.
Proposed Sec. 13.5(a) addressed the accrual of paid sick leave.
First, proposed Sec. 13.5(a)(1) implemented section 2(a) of Executive
Order 13706, 80 FR 54697, by providing that a contractor shall permit
an employee to accrue not less than 1 hour of paid sick leave for every
30 hours worked on or in connection with a covered contract. It further
provided that a contractor shall aggregate an employee's hours worked
on or in connection with all covered contracts for that contractor for
purposes of paid sick leave accrual. As the NPRM explained, under this
approach, if, for example, a subcontractor that installs windows in
building construction projects sends a single employee to three
separate DBA-covered projects, all the time the employee spends on all
worksites--whether during the same or different pay periods--for the
subcontractor must be added together to determine how much paid sick
leave the employee has accrued. If in one pay period the employee spent
20 hours at Site A and 10 hours at Site B, she would have accrued 1
hour of paid sick leave at the end of that pay period; if in the next
pay period the employee spent 30 hours at Site C, she would then have a
total accrual of 2 hours of paid sick leave. As for an employee who
falls within the Sec. 13.4(e) exclusion in some workweeks but not
others, only the employee's hours worked on or in connection with
covered contracts during workweeks in which the exclusion does not
apply would count toward accrual of paid sick leave. The Department
received no comments regarding these portions of Sec. 13.5(a)(1) and
adopts them as proposed.
Proposed Sec. 13.5(a)(1)(i) explained that for purposes of
Executive Order 13706 and part 13, ``hours worked'' would include all
time for which an employee is or should be paid, meaning time an
employee spends working or in paid time off status, including time when
the employee is using paid sick leave or any other paid time off
provided by the contractor. The proposed definition was different from
the use of the term ``hours worked'' in other contexts and was to apply
only for purposes of the Executive Order. It included (but was broader
than) all time considered ``hours worked'' for purposes of the SCA and
the FLSA, i.e., all time an employee is suffered or permitted to work.
29 CFR 4.178; 29 CFR 785.11.
The Department explained that its proposed interpretation of
``hours worked'' under Executive Order 13706 to additionally include
paid time off, although distinct from the FLSA and SCA definitions of
the term, was analogous to the accrual of vacation leave under the SCA,
where absences from work (with or without pay) generally count toward
satisfaction of length of service requirements for vacation benefits.
29 CFR 4.173(b)(1). It was also consistent with the OPM regulation
regarding leave accrual by federal employees, which provides that an
employee accrues leave each pay period based on time she is ``in a pay
status.'' 5 CFR 630.202(a). The Department's proposed interpretation
reflected its view that basing paid sick leave accrual on all time an
employee is in pay status, rather than merely on when the employee is
suffered or permitted to work, would be administratively easier (or no
more difficult) for contractors to implement. The Department further
noted in the NPRM that this interpretation generally would have minimal
impact on the rate of an employee's accrual of paid sick leave and,
with respect to many employees who work at least full time (or
potentially even less) each week on or in connection with covered
contracts, would have no impact on the total amount of paid sick leave
accrued per year because such employees will reach the maximum 56 hours
within each accrual year regardless of whether paid time off is
included.
Many commenters, including the National Partnership, CAP Women's
Initiative, NELP, NETWORK Lobby for Catholic Social Justice (NETWORK),
Women Employed, and the AFL-CIO expressed support for the NPRM's
definition of hours worked. But other commenters opposed it: Koga
Engineering and Construction, Royal Contracting Company, Master Sheet
Metal, Inc., the General Contractors Association of Hawaii, and
Vigilant wrote that it is a basic premise of accruing leave that
workers earn time off by working, EEAC believed it would be appropriate
for ``hours worked'' to have the same meaning for purposes of this
rulemaking as it does in the FMLA context; the SBLC believed the
proposed definition would discourage employers from having generous
time off policies; and the American Benefits Council, Seyfarth Shaw,
and the Chamber/IFA commented that the proposed definition would be
confusing to administer because it differs from State and local paid
sick time laws.
After considering the input received from commenters, the
Department has decided to change the definition of hours worked such
that it does not include paid time off. Instead, the term ``hours
worked'' will have the same meaning for purposes of Executive Order
13706 and part 13 as it does under the Fair Labor Standards Act, as
described in 29 CFR part 785. The Department anticipates that this
change will make administration of paid sick leave easier for those
contractors who are familiar with this definition under other statutes
and/or already apply it for purposes of complying with a State or local
paid sick time law. Any contractor that prefers to calculate its
employees' paid sick leave accrual based on hours worked and hours
spent in paid time off status is permitted, though not required, to do
so.
As it did in the NPRM, the Department reiterates that a contractor
would only be required to count hours worked on or in connection with a
covered contract, rather than hours worked on or in connection with a
non-covered contract, toward paid sick leave accrual. For example, if
an employee works on an SCA-covered contract for
[[Page 67625]]
security services for 30 hours each pay period and works for the same
contractor on a private contract for security services for an
additional 30 hours each pay period, the contractor would only be
required to allow that employee to accrue 1, rather than 2, hours of
paid sick leave each pay period. Similarly, if an employee works for
one contractor on a DBA-covered contract for construction for 2 months
and then on a private contract for construction for 2 months, the
contractor would only be required to allow the employee to accrue paid
sick leave during the first 2 months. But the Department proposed to
require contractors who wish to distinguish covered and non-covered
hours worked for purposes of paid sick leave accrual to keep records
that clearly reflect that distinction.
Specifically, proposed Sec. 13.5(a)(1)(i) explained that to
properly exclude time spent on non-covered work from an employee's
hours worked that count toward the accrual of paid sick leave, a
contractor must accurately identify in its records the employee's
covered and non-covered hours worked. The Department's proposal
explained that, in the absence of records or other proof adequately
segregating the time--whether because of a contractor's inadequate
recordkeeping, because the contractor preferred permitting the employee
to more rapidly accrue paid sick leave rather than keeping such
records, or for another reason--the employee would be presumed to have
spent all paid time performing work on or in connection with a covered
contract. This proposed policy was consistent with the treatment of
hours worked on SCA- and non-SCA-covered contracts, see 29 CFR 4.178,
4.179, as well as the treatment of covered versus non-covered time
under the Minimum Wage Executive Order rulemaking, see 79 FR 60660-61,
60672.
Several commenters expressed concern about segregating employees'
covered and non-covered work time. SBA Advocacy wrote that such
segregation would be difficult, in particular in the construction
industry in which employees move between work on different contracts,
for seasonal recreational businesses in which employees work in remote
locations, and for contractors in general as to employees who do not
work directly on contracts, such as accounting, delivery, and
management staff. DLA Piper and the HR Policy Association asked for
more information about the type of proof that would be sufficient; DLA
Piper asked whether, for example, a list or copies of all invoices
processed by an accounting clerk, including some that relate to covered
contracts, would be required. EEAC, PSC, and DLA Piper asked if, with
respect to employees working in connection with covered contracts (such
as receptionists and mail room clerks), contractors would be permitted
to make estimates based on a contractor's revenue or some other basis.
The Department believes that in most circumstances it will be
simple, or at least practicable, to distinguish an employee's work on a
covered contract from time spent on non-covered contracts, such as when
a mechanic spends some time at a site of construction on a DBA-covered
contract and some time at a site of construction on a private contract.
But it appreciates that segregation of time will be more complicated in
circumstances in which an employee works only in connection with
covered contracts, such as, as the commenters noted, when a
receptionist answers phone calls, or a mail room clerk sorts mail,
regarding numerous projects, or when, as MCAA and SMACNA recognized, a
contractor has employees in its off-site fabrication shop prefabricate
pipe assemblies or ducts for delivery and installation at projects
undertaken pursuant to both covered and non-covered contracts.
Therefore, the Department has added to Sec. 13.5(a)(1)(i) a statement
allowing a contractor to estimate the portion of an employee's hours
worked spent in connection with (but not on) covered contracts provided
the estimate is reasonable and based on verifiable information.
As suggested by the commenters, such information could include the
portion of a contractor's total revenue that derives from covered
contracts if it is reasonable to assume that an employee's work time is
roughly evenly divided across all of the contractor's work. If, for
example, a contractor derives half of its revenue from covered
contracts, the contractor would likely have a reasonable basis for
estimating that employees in the mail room of the contractor's
corporate headquarters spend half of their hours worked in connection
with covered contracts. But if that contractor has offices in two
locations, and all of its work at one of those locations pertains to
covered contracts, the contractor could not reasonably assume that the
staff in the mail room at that location worked in connection with
covered contracts only 50 percent of the time.
An estimate of this type based on information other than a
contractor's revenue could also be appropriate. For example, a
contractor could estimate that a receptionist who handles incoming
calls for a group of other employees who work on covered contracts
during, on average, one third of their work time also spends one third
of her hours worked in connection with covered contracts. Like the
basis for an estimate, the period of time for which an estimate could
appropriately be used would also vary depending upon the circumstances;
for example, a contractor that claims the Sec. 13.4(e) exclusion for
its receptionist because at the time, only 5 percent of its revenue
derived from covered contracts would not be able to continue to do so
if the contractor is awarded a new covered contract that will account
for 40 percent of its revenue for the next year.
Proposed Sec. 13.5(a)(1)(ii) required a contractor to calculate an
employee's accrual of paid sick leave no less frequently than at the
conclusion of each workweek. The Department explained in the NPRM that
it considered ``workweek'' to have the meaning explained in the FLSA
regulations, i.e., a fixed and regularly recurring period of 168
hours--seven consecutive 24-hour periods--that need not coincide with
the calendar week but must generally remain fixed for each employee.
See 29 CFR 778.105. NECA, SBLC, Vigilant, and the National Defense
Industrial Association (NDIA) urged the Department not to adopt this
provision as proposed, asserting that contractors' systems are
configured to account for time each pay period rather than as
frequently as once a week. Several of these commenters requested that
instead, the Department require accrual at the end of each pay period
or, if contractors' pay periods occur less frequently than twice a
month, then at least that often. The Department is adjusting the
regulatory text based on these comments. Rather than requiring that
paid sick leave accrue no less frequently than at the end of each
workweek, Sec. 13.5(a)(1)(ii) will require that accrual occur no less
frequently than at the conclusion of each pay period or each month,
whichever interval is shorter. This provision has no effect on a
contractor's obligation under the SCA to have semimonthly (or more
frequent) pay periods, see 29 CFR 4.6(h), or under the DBA to have
weekly pay periods, see 40 U.S.C. 3142(c)(1), 29 CFR 5.5(a)(3). The
Department anticipates that this added flexibility will benefit those
contractors who currently track hours worked less frequently than each
week, although it notes that contractors may still choose to calculate
paid sick leave accrual each week, and will be required to do so if
they have weekly pay periods. This
[[Page 67626]]
change is also consistent with modifications to proposed Sec.
13.5(a)(2), described below.
Proposed Sec. 13.5(a)(1)(ii) also provided that a contractor was
not required to allow employees to accrue paid sick leave in increments
smaller than 1 hour for completion of any fraction of 30 hours worked.
In other words, under the proposal, an employee could accrue 1 hour of
paid sick leave after working a full 30 hours, rather than accruing any
fraction of an hour for any fraction of 30 hours worked. Proposed Sec.
13.5(a)(1)(ii) further required any remaining fraction of 30 hours to
be added to hours worked for the same contractor in subsequent
workweeks to reach the next 30 hours worked provided that the next
workweek in which the employee performs on or in connection with a
covered contract occurs within the same accrual year. (The term accrual
year is defined in proposed Sec. 13.2 and addressed in the discussion
of Sec. 13.5(b)(1) below.) Vigilant expressed approval of these
provisions, and the Department adopts them essentially as proposed,
although the references to ``workweeks'' have been changed to ``pay
periods'' for consistency with the change to the first sentence of the
provision.
The NPRM included an example of how Sec. 13.5(a)(1)(ii) would
operate in practice. The Department provides a similar example here,
although it has modified the specifics to reflect how accrual would
occur at the end of a pay period rather than after each workweek.
Assume a contractor has 2-week pay periods, and an employee works on a
covered concessions contract for 80 hours in pay period 1 and 35 hours
in pay period 2. At the conclusion of pay period 1, the employee will
have accrued 2 hours of paid sick leave based on his first 60 hours
worked and, unless the employer chooses to allow accrual in increments
smaller than 1 hour, will not have accrued any more paid sick leave
based on the additional 20 hours he worked in that pay period. At the
conclusion of pay period 2, the employee will have accrued 1 additional
hour of paid sick leave based on the remaining 20 hours from pay period
1 plus his first 10 hours worked in pay period 2. The employee need not
have accrued any paid sick leave based on the remaining 25 hours worked
during pay period 2 (because 25 is less than 30). If the employee
spends several subsequent weeks working for the contractor on a private
contract and then returns to working on the covered concessions
contract, under this provision, those remaining 25 hours would be added
to his subsequent hours worked on the concessions contract for purposes
of reaching his next accrued hour of paid sick leave (provided his
return to the covered concessions contract occurred within the same
accrual year as pay period 2). As noted in the proposal, an employer
might wish to permit employees to accrue paid sick leave in fractions
of an hour, perhaps because it finds the related recordkeeping less
burdensome than keeping track of hours worked from previous workweeks,
it allows for use of paid sick leave in increments smaller than 1 hour,
or for some other reason. An employer may elect to do so provided all
hours worked for the contractor on or in connection with covered
contracts within the accrual year are counted toward an employee's paid
sick leave accrual.
Proposed Sec. 13.5(a)(1)(iii) addressed the accrual of paid sick
leave for employees as to whom contractors are not obligated by another
statute to keep records of hours worked. As the Department explained in
the NPRM, for most employees on covered contracts, such as service
employees on SCA-covered contracts, laborers and mechanics on DBA-
covered contracts, and all employees performing work on or in
connection with any covered contract whose wages are governed by the
FLSA, contractors are already obligated by the SCA, DBA, or FLSA to
keep records of employees' hours worked. 29 CFR 4.6(g)(1)(iii), 4.185
(SCA); 29 CFR 5.5(a)(3)(i) (DBA); 29 CFR 516.2(a)(7), 516.30(a) (FLSA).
Therefore, as to those employees, contractors are already collecting
the information necessary to calculate the accrual of paid sick leave.
But for those employees who are employed in a bona fide executive,
administrative, or professional capacity, as those terms are defined in
29 CFR part 541, contractors are not currently required by the SCA,
DBA, or FLSA to keep such records. See 29 CFR 4.6(g)(1)(iii), 4.156,
4.185 (requiring that records be kept for ``service employees'' to whom
the SCA applies and excluding from that category ``persons employed in
an executive, administrative, or professional capacity as those terms
are defined in 29 CFR part 541); 29 CFR 5.5(a)(3)(i), 5.2(m) (requiring
that records be kept for ``laborers and mechanics'' to whom the DBA
applies and excluding from those terms ``[p]ersons employed in a bona
fide executive, administrative, or professional capacity as defined in
part 541 of this title''); 29 CFR 516.3 (excusing employers of ``each
employee in a bona fide executive, administrative, or professional
capacity . . . as defined in part 541 of this chapter'' from the FLSA
requirement to maintain and preserve records of hours worked).
In order not to impose a new recordkeeping burden on employers of
such employees, proposed Sec. 13.5(a)(1)(iii) allowed contractors to
choose to continue not to keep records of such employees' hours worked,
but instead to allow the employees to accrue paid sick leave as though
the employees were working on or in connection with a covered contract
for 40 hours per week. Contractors could, under the proposed provision,
choose to calculate paid sick leave accrual by tracking the employee's
actual hours worked provided they permitted the relevant employees to
accrue paid sick leave based on their actual hours worked consistently
across workweeks rather than, for example, using the 40 hours
assumption in workweeks during which an employee works more than 40
hours but not those in which the employee works fewer. Under the
proposed approach, the Department would apply these principles to any
employees exempt from the FLSA's minimum wage and overtime provisions
and not covered by the SCA or DBA. The Department explained in the NPRM
that this approach is consistent with FMLA recordkeeping regulations,
under which there is a general requirement that FMLA-covered employers
keep records of hours worked by employees eligible for FMLA leave but
an exception with respect to employees who are not covered by or are
exempt from the FLSA; employers of those employees need not keep such
records so long as the employer presumes that the employees have met
the hours requirement for FMLA eligibility. See 29 CFR 825.500(c)(1),
(f). The Department received a supportive comment from Vigilant
regarding the proposal to allow contractors to use this 40 hours
assumption, and it adopts it as proposed.
Proposed Sec. 13.5(a)(1)(iii) also provided that if an employee as
to whom an employer is not otherwise required to keep a record of hours
worked regularly works fewer than 40 hours per week on or in connection
with covered contracts, whether because the employee's time is split
between covered and non-covered contracts or because the employee is
part-time, the contractor could allow the employee to accrue paid sick
leave based on the employee's typical number of hours worked on covered
contracts per workweek. The Department further explained in the NPRM
that, although the contractor need not keep records of
[[Page 67627]]
the employee's hours worked each week, to use a number less than 40 for
this purpose, the contractor was required to have probative evidence of
the employee's typical number of covered hours worked, such as payroll
records showing that an employee who performs on a covered contract was
paid for only 20 hours per week by the contractor.
PSC expressed concern about ``intrusive second-guessing by [the
Department's] auditors'' regarding the determination of an employee's
usual time spent on or in connection with covered contracts and
suggested that the Department revise this provision to state that it
would presume a contractor's estimate of the portion of time an
employee exempt from the FLSA's minimum wage and overtime requirements
spends working in connection with covered contracts is reasonable
unless countered by a preponderance of the evidence. The Department is
not adopting this suggestion because of the incentives it would create;
more specifically, it would likely reward any contractor that chose not
to keep records that could be the basis for a sound determination of
how much time employees spend working in connection with covered
contracts.
The Department has, however, modified the proposed regulatory text
to alleviate the concerns of PSC and other commenters regarding the
tracking of time of employees who work exclusively in connection with,
rather than on, covered contracts. Specifically, Sec. 13.5(a)(1)(iii)
now provides that a contractor must have probative evidence to support
using an assumed typical number of hours worked on or in connection
with covered contracts that is less than 40 or, if the employee
performs work in connection with rather than on covered contracts, a
contractor may estimate the employee's typical number of hours worked
in connection with covered contracts per workweek provided the estimate
is reasonable and based on verifiable information. This language is the
same as that used in Sec. 13.5(a)(1)(i) with respect to employees as
to whom contractors are obligated to track hours worked and is intended
to provide the same flexibility for contractors as to employees who
qualify for an exemption from the FLSA's minimum wage and overtime
requirements.
Proposed Sec. 13.5(a)(2) required a contractor to inform an
employee, in writing, of the amount of paid sick leave that the
employee has accrued but not used (i) no less than monthly, (ii) at any
time when the employee makes a request to use paid sick leave, (iii)
upon the employee's request for such information, but no more often
than once a week, (iv) upon a separation from employment, and (v) upon
reinstatement of paid sick leave pursuant to Sec. 13.5(b)(3). Some of
these requirements were based on FMLA regulations regarding
notification to an employee of how much leave will be or has been
counted against her FMLA entitlement, see 29 CFR 825.300(d)(6), but
they were modified to account for the differences between FMLA leave
and paid sick leave, including in the method of accrual. The fourth and
fifth requirements were meant to ensure that employees who may be and
ultimately are rehired by a contractor know how much paid sick leave
they should and do have available upon such rehiring. In the NPRM, the
Department explained that it was important that employees be able to
determine whether absences will be paid (so they can, for example,
schedule their own or their family members' doctors' appointments to
occur after they have accrued sufficient paid sick leave), and that
these notification requirements would not create a significant burden
for contractors.
CPD, NWLC, the National Council of Jewish Women, Greater New
Orleans Section, the National Association of Social Workers, the State
Innovation Exchange, and the Coalition on Human Needs wrote that these
various requirements would ensure that employees have the information
they need to effectively use paid sick leave, and the Seattle Office of
Labor Standards noted in particular that if workers cannot access
information about their leave balances, they are less likely to use the
benefit even when they are ill. The Chamber/IFA, the American Council
of Engineering Companies (ACEC), NDIA, NECA, SBLC, Seyfarth Shaw, and
the ERISA Industry Committee all asserted, however, that weekly
notifications were too frequent and that responding to employee
requests for accrual amounts would generate burdensome work and
paperwork. Commenters offered varied alternative suggestions: IEC asked
that the Department give contractors full discretion over when to
inform employees how much paid sick leave they have accrued; EEAC and
Vigilant requested that notifications be required quarterly; PSC
believed notification in the ordinary course of payroll administration
should be sufficient; and NDIA and Delta indicated that notification
each pay period or at least twice a month would be preferable.
The Department has modified proposed Sec. 13.5(a)(2) in light of
these comments. Specifically, under the regulatory text as adopted,
contractors will be required to inform each employee, in writing, of
the amount of paid sick leave the employee has accrued but not used no
less than once per pay period or per month, whichever interval is
shorter, as well as upon a separation from employment and upon
reinstatement of paid sick leave pursuant to paragraph (b)(4) of this
section. The Department believes this revised provision appropriately
balances the need to ensure that employees are informed about the paid
sick leave they have available for use with the interests of
contractors in administering paid sick leave in a manner that is not
unnecessarily burdensome. As was true of a corresponding change to
Sec. 13.5(a)(ii), this provision has no effect on a contractor's
obligation under the SCA to have at least semimonthly pay periods, see
29 CFR 4.6(h), or under the DBA to have weekly pay periods, see 40
U.S.C. 3142(c)(1), 29 CFR 5.5(a)(3). The Department also notes that
contractors are free to provide notifications to employees more
frequently than is required, including in response to employee
requests.
PSC, EEAC and Roffman Horvitz, PLC asked in their comments that the
Department allow contractors to satisfy the requirements of Sec.
13.5(a)(2) with a self-service portal employees can access to check
their paid sick leave accrual, as long as the contractor keeps the
information updated. The Department intended its proposal to be
understood to accommodate such a system. Indeed, in the discussion of
proposed Sec. 13.5(a)(2) in the NPRM, the Department noted that a
contractor's existing procedure for informing employees of their
available paid time off, such as notification accompanying each
paycheck or an online system an employee can check at any time, could
be used to satisfy or partially satisfy these accrual notification
requirements provided it is written and clearly indicates the amount of
paid sick leave an employee has accrued separately from indicating
amounts of other types of paid time off available (except where the
employer's paid time off policy satisfies the requirements of Sec.
13.5(f)(5), described below). If the contractor customarily corresponds
with or makes information available to its employees by electronic
means, ``written'' for this purpose includes electronic transmissions.
The Department has inserted language to this effect into the
[[Page 67628]]
regulatory text to eliminate any confusion.
Finally, Vigilant commented with respect to proposed Sec.
13.5(a)(2) that verbal notifications of an employee's amount of accrued
paid sick leave should be sufficient. The Department believes written
notifications are more useful for employees and not particularly
burdensome for contractors, particularly because the requirement is
modified to coincide with pay periods, when contractors will already be
providing information to employees, and because the requirement may be
satisfied by electronic communication, such as by email or an
appropriate self-service portal. Accordingly, it has not modified this
provision as requested.
Proposed Sec. 13.5(a)(3) permitted a contractor to choose to
provide an employee with at least 56 hours of paid sick leave at the
beginning of each accrual year rather than allowing the employee to
accrue such leave based on hours worked over time. As proposed, it
further provided that in such circumstances, the contractor need not
comply with the accrual requirements described in Sec. 13.5(a)(1). The
proposed section required the contractor to allow carryover of paid
sick leave as required by Sec. 13.5(b)(2), and although the contractor
could limit the amount of paid sick leave an employee may carry over to
no less than 56 hours, the contractor could not limit the amount of
paid sick leave an employee has available for use at any point as is
otherwise permitted by Sec. 13.5(b)(3). The NPRM provided an example
to illustrate the operation of these principles: if a contractor
exercises this option and an employee carries over 16 hours of paid
sick leave from one accrual year to the next (as described in the
discussion of Sec. 13.5(b)(2) below), the contractor must permit the
employee to have 72 hours (16 hours plus 56 hours) of paid sick leave
available for use as of the beginning of the second accrual year
(because the contractor is not permitted to limit an employee's paid
sick leave at any point in time as described in the discussion of Sec.
13.5(b)(3) below).
Under Sec. 13.5(c)(4), described below, the contractor may not
limit the employee's use of that paid sick leave in the second (or any)
accrual year, but the employee's use can effectively be limited if the
contractor sets, as permitted by this proposed provision, a limit on
the amount of paid sick leave an employee can carry over from year to
year; in the example, if the employee who had 72 hours of paid sick
leave at the beginning of accrual year 2 did not use any leave in that
year, she could be permitted to carry over only 56 hours into accrual
year 3. The Department explained in the NPRM that it believed this
option would be beneficial to contractors that find the tracking of
hours worked and/or calculations of paid sick leave accrual to be
burdensome and would provide employees with the full amount of paid
sick leave contemplated by the Executive Order at the beginning of each
accrual year.
EEAC, the SBLC, Seyfarth Shaw, the HR Policy Association, the
American Benefits Council, the ERISA Industry Committee, SHRM/CUPA-HR,
and the Chamber/IFA all generally supported proposed Sec. 13.5(a)(3)
because they agree it is an advantage for contractors to be excused
from tracking paid sick leave accrual, but these commenters strongly
objected to the requirement under the proposed provision to carry over
paid sick leave that was not used in one accrual year into the next.
The commenters asserted that employees would unfairly benefit from
having more than 56 hours of paid sick leave available at once and that
under State and local paid sick time laws, the option to ``frontload''
leave benefits employees because they do not have to wait to accrue
paid sick time before being able to use it and, in turn, benefits
employers because they do not have to permit carryover. The NYC
Department of Consumer Affairs and AFL-CIO also supported the proposed
provision, noting that it was helpful, especially for small employers,
to have the flexibility it creates, and did not suggest that it be
modified.
After carefully considering these comments, the Department is not
modifying the proposed provision as requested (although some of the
proposed text has become Sec. 13.5(a)(3)(i) because of other additions
to the provision that constitute new subparagraphs (ii) and (iii),
described below). First and most significantly, the Executive Order
itself requires that paid sick leave carry over from one year to the
next. 80 FR 54697. Second, the Department believes that this option, as
designed, benefits contractors by permitting them to avoid the
obligation to track paid sick leave accrual, which requires accounting
for an employee's hours worked and performing calculations each pay
period, and it would not be appropriate to also allow contractors who
elect to use this option to reduce the total amount of paid sick leave
an employee could accrue and use. Specifically, if a contractor does
not exercise this option and as in the example described above, an
employee carries over 16 hours of paid sick leave from one accrual year
to the next, if the employee uses those 16 hours, he must be permitted
to accrue 56 more, meaning he could (if he has reason to use the paid
sick leave and enough hours worked to accrue the maximum number of paid
sick leave hours the contractor permits) have 72 total hours of paid
sick leave available for use over the course of accrual year 2--just as
the employee in the example above has 72 hours (that she also might or
might not have reason to use during the year).
Commenters also asked for specific additions to the proposed
provision. EEAC noted that the NPRM did not address circumstances in
which an employee starts work for a contractor who has chosen this
option in the middle of an accrual year and suggested the Department
provide that the employee should begin with as much paid sick leave as
she would have been able to accrue based on her typical, predicted
hours worked in the remainder of the year. The Department appreciates
that these circumstances could arise and that it will not always be
appropriate to provide a new employee with 56 hours of paid sick leave.
Accordingly, it is adding as Sec. 13.5(a)(3)(ii) regulatory text
providing that if a contractor chooses to use the option described in
Sec. 13.5(a)(3) and the contractor hires an employee or newly assigns
the employee to work on or in connection with a covered contract after
the beginning of the accrual year, the contractor may provide the
employee with a prorated amount of paid sick leave based on the number
of pay periods remaining in the accrual year. Under this new provision,
if, for instance, an employee was hired by a contractor to work full-
time on a covered contract after one-third of the pay periods in the
current accrual year had passed, that employee would be entitled to
begin her employment with at least 37 hours (two-thirds of 56 hours,
rounded to the nearest hour) of paid sick leave. The Department notes
that if a contractor chooses an accrual year that begins on the date an
employee begins work on or in connection with a covered contract, this
issue will not arise and this new provision will not be relevant.
Vigilant asked that contractors be permitted to select this option
as to only some employees, such as if they wish to track accrual for
newly hired workers and switch to providing 56 hours of paid sick leave
at the beginning of an employee's second year of employment. The
Department agrees that contractors should have flexibility in deciding
when and as to whom they choose this option. It may be, for example,
that as to some employees, tracking accrual is simple, whereas for
others it is more
[[Page 67629]]
complicated, and a contractor wishes to treat those employees
differently for that reason. Or a contractor might change timekeeping
systems during the course of a covered contract and determine that one
option has become preferable to another in later accrual years.
Therefore, the Department has added Sec. 13.5(a)(3)(iii), which
provides that a contractor may use the option described in Sec.
13.5(a)(3) as to any or all of its employees in any or all accrual
years. This language is not intended to permit a contractor to change
its accrual systems during an accrual year, but rather, at the
beginning of a new accrual year. As with all actions a contractor takes
with respect to paid sick leave, a contractor may not use the decision
of whether to elect this option to avoid its obligations under the
Executive Order.
Finally, the SBLC made two suggestions: first, that contractors be
permitted to prorate the amount of leave employees who work less than
full-time on or in connection with covered contracts receive at the
beginning of an accrual year under this option, and second, that
contractors be permitted to provide employees with paid sick leave each
quarter, rather than each year, without tracking accrual, noting that
under such a system, ``rollover'' of paid sick leave between quarters
would be appropriate. The Department has considered these suggestions
but has decided not to adopt either of them. Prorating the amount of
leave provided under this option could be administratively complicated
(it would require, for example, knowing in advance how much time an
employee will work on or in connection with a covered contract over the
course of a full year) and is unnecessary because, as explained above,
employers now explicitly have the option of tracking accrual based on
hours worked on or in connection with covered contracts for part-time
employees even if they use the Sec. 13.5(a)(3) option for full-time
employees. Regarding a quarterly accrual system, the Department notes
that most commenters responded positively to the proposed option to
provide an alternative to tracking accrual, and adding another method
of calculating accrual would introduce unnecessary confusion for both
contractors and for purposes of enforcement by the Wage and Hour
Division.
Proposed Sec. 13.5(b) implemented the Executive Order's
provisions, in sections 2(b), (d), and (j), regarding maximum accrual,
carryover, and reinstatement of paid sick leave as well as non-payment
for unused paid sick leave.
Proposed Sec. 13.5(b)(1) allowed a contractor to limit the amount
of paid sick leave an employee is permitted to accrue at not less than
56 hours in each accrual year. The Department received no comments on
this portion of the provision, which implements section 2(b) of the
Executive Order, and adopts it as proposed.
Proposed Sec. 13.5(b)(1) also provided detail regarding an accrual
year, a term defined in Sec. 13.2. The Department proposed to explain
that an accrual year is a 12-month period beginning on the date an
employee's work on or in connection with a covered contract began or
any other fixed date chosen by the contractor, such as the date a
covered contract began, the date the contractor's fiscal year begins, a
date relevant under State law, or the date a contractor uses for
determining employees' leave entitlements under the FMLA pursuant to 29
CFR 825.200. Under the proposal, a contractor could choose its accrual
year but was required to use a consistent option for all employees and
could not select or change its accrual year in order to avoid the paid
sick leave requirements of Executive Order 13706 and part 13. The NPRM
explained that as under the FMLA, if a contractor does not select an
accrual year, the option that provides the most beneficial outcome to
the employee would be used. See 29 CFR 825.200(e).
EEAC commented that contractors should be permitted to choose
different accrual years for groups of similarly situated employees,
offering as examples employees who are covered by a CBA, those who are
employed by the contractor as the result of a merger with or
acquisition of a different company, or those as to whom different paid
time off policies apply. Because the Department agrees that there could
be circumstances in which it would be difficult for a contractor to
select the same accrual year for all employees, such as if a large
contractor employs some workers subject to a CBA that calls for the
accrual year to begin on one date and others subject to a relevant
State law that calls for a different date, it has modified the
regulatory text to incorporate EEAC's suggestion. The Department notes,
however, that the contractor must choose the same accrual year (or, if
the contractor chooses an accrual year that begins on the date an
employee begins work on or in connection with a covered contract, the
same accrual year methodology) for similarly situated employees and, as
noted at the proposal stage, may not select or change any employee's
accrual year in order to avoid the paid sick leave requirements of the
Order and part 13.
Proposed Sec. 13.5(b)(2) provided that paid sick leave shall carry
over from one accrual year to the next. The proposed language would
mean that upon the date a contractor has selected as the beginning of
the accrual year, an employee would continue to have available for use
as much paid sick leave as the employee had accrued but not used as of
the end of the previous accrual year. This portion of Sec. 13.5(b)(2)
implements section 2(d) of the Executive Order, and no commenter
opposed it, so the Department adopts it as proposed.
Proposed Sec. 13.5(b)(2) further provided that paid sick leave
carried over from the previous accrual year would not count toward any
limit the contractor sets on the annual accrual of paid sick leave. The
NPRM explained that under this proposal, if an employee carries over 30
unused hours of paid sick leave from accrual year 1 to accrual year 2,
for example, she must still be permitted to accrue up to 56 additional
hours of paid sick leave in accrual year 2 rather than only 26 (because
30 plus 26 is 56), subject to the limitations described below. NAM
opposed this portion of the proposed provision, asserting that it
allows employees to accrue more than 56 hours in a year. The Department
believes that the Executive Order's requirement that a contractor allow
an employee to accrue up to 56 hours annually only has meaningful
effect if an employee can accrue up to 56 hours of new paid sick leave
in each accrual year rather than merely carry over unused paid sick
leave from the previous accrual year. The Department notes that an
employee's ability to accrue additional paid sick leave if she has
carried over unused leave from the previous year is limited by Sec.
13.5(b)(3) (which, as described below, allows a contractor to limit the
amount of paid sick leave an employee has at any point in time) and
that an employee's ability to use paid sick leave, regardless of the
amount she has accrued, is limited by the set of reasons that justify
such use listed in Sec. 13.5(c)(1) (which, as described below, sets
forth the purposes for which an employee may use paid sick leave). As
an example, as noted by EEAC, if an employee accrues 56 hours of paid
sick leave in accrual year 1 and uses no paid sick leave in year 1 or
year 2, she could begin accrual year 3 with only 56 hours of leave,
having accrued none in accrual year 2 (pursuant to Sec. 13.5(b)(3));
in other words, the effect of this provision on an employee's ability
to accrue paid sick leave is limited.
[[Page 67630]]
Accordingly, this provision is adopted as proposed.
Proposed Sec. 13.5(b)(3) allowed a contractor to limit the amount
of paid sick leave an employee is permitted to have available for use
at any point to not less than 56 hours and further explained that even
if an employee has accrued fewer than 56 hours of paid sick leave since
the beginning of the accrual year, the employee need only be permitted
to accrue additional paid sick leave if the employee has fewer than 56
hours available for use. The NPRM provided as an example a circumstance
in which an employee carries over 56 hours of paid sick leave into a
new accrual year; in that case, a contractor need not permit that
employee to accrue any additional paid sick leave until she has used
some portion of that leave. If and when she does use paid sick leave,
she must be permitted to accrue additional paid sick leave, up to a
limit of no less than 56 hours for the accrual year, beginning with
hours worked in the pay period after she has used paid sick leave such
that her amount of available leave is less than 56 hours. Similarly, as
explained in the NPRM, if an employee carries over 16 hours of paid
sick leave into a new accrual year, she must be permitted to accrue 40
additional hours of paid sick leave even if she does not use any paid
sick leave while that accrual occurs. Once she has 56 hours of paid
sick leave accrued, the contractor may prohibit her from accruing any
additional leave unless, and until the pay period after, she uses some
portion of the 56 hours. If she uses, for example, 24 hours of paid
sick leave in the same accrual year (such that she has 32 hours
remaining available for use), she must be permitted to accrue up to at
least 16 more hours (in addition to the 40 hours she has already
accrued during the accrual year) for a total of 56 hours accrued in
that accrual year. If she did so, she would then have 48 hours of paid
sick leave (32 previously available hours plus 16 newly accrued hours)
available for use and could be limited to that amount until the next
accrual year.
Numerous commenters, including Caring Across Generations, the
American Association of University Women, the National Association of
County and City Health Officials, and the National Hispanic Council on
Aging, asked the Department to simplify the accrual system by limiting
the amount of paid sick leave an employee can carry over from one
accrual year to the next rather than the amount of paid sick leave an
employee has available at any point in time. And Seyfarth Shaw noted
that the Department's proposed system will be confusing for contractors
because limiting the amount of paid sick leave an employee may have
available for use deviates from the way many State and local paid sick
time laws operate. Although the Department appreciates the commenters'
interest in having paid sick leave accrual operate in the simplest
manner possible, the Department declines to adopt this suggestion
because it believes its proposed system to be faithful to the Executive
Order, which provides in section 2(b) that ``[a] contractor may not set
a limit on the total accrual of paid sick leave per year, or at any
point in time, at less than 56 hours.'' 80 FR 54697 (emphasis added).
Accordingly, the Department adopts Sec. 13.5(b)(3) as proposed. The
Department notes, however, that consistent with the permissive language
of Sec. 13.5(b)(3), contractors would be in compliance with the Order
and part 13 if they permitted employees to have available for use an
amount of paid sick leave greater than 56 hours and if they allowed
employees with more than 56 hours of paid sick leave available for use
to carry over only 56 of those hours into the next year; in other
words, a contractor may choose to use the simplified system the
commenters prefer, based on ease of administration, compliance with a
State or local paid sick time law, or for any other reason.
Proposed Sec. 13.5(b)(4) implemented the second clause of section
2(d) of the Executive Order by requiring that paid sick leave be
reinstated for employees rehired by the same contractor or a successor
contractor within 12 months after a job separation. The proposed text
specified that this reinstatement requirement applied whether the
employee leaves and returns to a job on or in connection with a single
covered contract or works for a single contractor on or in connection
with more than one covered contract, regardless of whether the employee
remains employed by the contractor to work on non-covered contracts in
between periods of working on covered contracts. The NPRM offered as an
example a situation in which a service employee on an SCA-covered
contract accrued but did not use 12 hours of paid sick leave, moved to
a different work site to perform work unrelated to a contract with the
Federal Government (either with or not with the same employer), and
after 6 months, returned to the original SCA-covered contract. In this
example, the employee would begin back on the original job with 12
hours of paid sick leave available for use. Pursuant to Sec. Sec.
13.5(a)(2) and 13.5(b)(1), if her first week back on the job is within
the same accrual year during which she accrued those 12 hours, the
contractor would be required to count any fraction of 30 hours worked
in her previous time on the contract toward the accrual of her next
hour of paid sick leave, but the contractor may limit her additional
accrual in that accrual year to 44 hours such that she can only accrue
56 hours total in the accrual year.
Proposed Sec. 13.5(b)(4) further explained that the reinstatement
requirement also applied if an employee takes a job on or in connection
with a covered successor contract after working for a different
contractor on or in connection with the predecessor contract, including
when an employee is entitled to a right of first refusal of employment
from a successor contractor under Executive Order 13495. (The terms
``successor contract'' and ``predecessor contract'' were defined in
proposed Sec. 13.2, and the requirements that a predecessor contractor
submit to a contracting agency, and a contracting agency provide to a
successor contractor, a certified list of relevant employees' accrued,
unused paid sick leave appeared in proposed Sec. Sec. 13.26 and
13.11(f), respectively.) The NPRM offered the example of an employee
performing work on a contract to sell food to the public in a National
Park who has accrued 16 hours of paid sick leave. If that contract
ends, a different contractor takes over the food stand, and the
employee is rehired by the successor contractor, he would begin his new
job with 16 hours of paid sick leave. In the NPRM, the Department
invited comments on its interpretation of section 2(d) of the Executive
Order to mean that the reinstatement requirement applied if an employee
is rehired by a different contractor on or in connection with a covered
successor contract after working on or in connection with the
predecessor contract. The Department described its belief that the
Executive Order's requirement to carry over previously accrued paid
sick leave for employees ``rehired by a covered contractor'' should be
interpreted to include different successor contractors who rehire
employees from the predecessor contract. It further noted that SCA-
covered successor contractors are generally required by the
Nondisplacement Executive Order to provide a right of first refusal of
employment to employees on the predecessor contract in positions for
which they are qualified, and as a result, many covered successor
contractors effectively ``rehire'' these employees,
[[Page 67631]]
making it reasonable to interpret Executive Order 13706 to provide that
such employees' accrued paid sick leave balances would carry over as
well. The NPRM also explained that this interpretation would ensure
that the carryover of accrued, unused leave would not depend on whether
the successor contract is awarded to the same contractor that performed
on the predecessor contract (in which case the Executive Order clearly
mandates that employees either keep their accrued, unused paid sick
leave or have it reinstated).
The Department's proposal recognized that the Government must
ensure that it spends money wisely and it is imperative that contract
actions result in the best value for the taxpayer. It further noted
that the Government understands contractors may include the costs of
benefits in overhead and it therefore may not (except in cost-type
contracts) pay contractors based on their actual costs. For these
reasons, the Department invited comments regarding the extent to which
its interpretation of the reinstatement requirement could affect
pricing and cost accounting, if at all, for covered contractors and
contracting agencies, including any potential for paying twice for the
same benefit--once to a predecessor contractor charging the Government
for predicted use of paid sick leave during its contract term, and a
second time to a successor contractor who would be obligated to pay for
unused sick leave later used by its employees during the successor's
contract, with the Government potentially bearing the added costs
through higher contract prices.
The Department's proposal noted a potential scenario in which a
contractor on a covered contract may have included in its bid the full
cost of providing 56 hours of paid sick leave to every employee
performing work on or in connection with the contract, and the
contracting agency may treat the full amount of such leave as an
allowable cost. At the end of the contract term, some employees will
likely have balances of accrued but unused paid sick leave which could
be carried over to a successor contractor. The Department specifically
sought comment on how the current contractor and any different
contractors bidding for the successor contract would account for this
situation in their bid pricing. Finally, the Department invited comment
as to the extent to which any potential impacts on pricing or cost
accounting might be mitigated, including ways to mitigate any potential
impact on subcontractors, small businesses, and prime contractors with
covered supply chains. In providing comments on the feasibility of
mitigation steps, the Department asked commenters to consider that the
requirement for paid sick leave flows down to all subcontract tiers and
that in other than cost-type contracts, the Government may not have
insight into and does not pay contractors based on their actual costs.
CLASP, Demos, the Working Families Organization, NETWORK, the
Diverse Elders Coalition, CAP Women's Initiative, Caring Across
Generations, CPD, NELP, and Equal Rights Advocates supported the
proposed provision, writing that reinstatement of leave by successor
contractors could encourage employees to continue working on successor
contracts, which would improve efficiency and reduce training costs for
the contractor. Other commenters supported the proposal for additional
reasons: The AFL-CIO noted that an employee's access to paid sick leave
should not depend on which contractor wins the contract on which she
works; the SEIU wrote that the retention of benefits is valuable to
employees and therefore will promote continuity on covered contracts;
the American Federation of State, County & Municipal Employees (AFSCME)
wrote that any costs of reinstating leave could be included in
contractors' bids, and the Building Trades asserted that the proposal
advances the goals of the Executive Order. Other commenters, however,
opposed the proposed provision: The PSC and the NAM argued that
potential successor contractors would not know the costs of the paid
sick leave they would have to reinstate at the time of bidding (further
suggesting that if such reinstatement is required, a successor
contractor should be entitled to a price adjustment after receiving the
certified list of employees' paid sick leave accrual created by the
predecessor contractor); the NAM also asserted that implementing this
requirement would be confusing and contracting agencies would be
charged twice for the same paid sick leave; and DLA Piper and the HR
Policy Association believed it would be challenging to create a
certified list of employees' paid sick leave accruals where tracking
employees' time is difficult, that it was unclear what a successor
contractor should do if it did not receive a certified list, and that
there would be unfairness to successor contractors where an employee
does so little covered work for the successor contractor that she would
not have been able to accrue paid sick leave on the successor contract.
After careful consideration of these comments, the Department is
promulgating the Final Rule without requiring that successor
contractors reinstate paid sick leave to employees who worked on the
predecessor contract. Although the Department appreciates the points
made by the commenters who supported the provision and had proposed
including it for those reasons, the Department finds the concerns of
commenters opposed to the provision compelling. Because at this time,
the Department has not identified a logistically viable mechanism to
address the concerns expressed about costs, including to the
government, the Department has removed the proposed provision. As noted
elsewhere, other definitions and requirements included in the proposed
rule to implement reinstatement by successor contractors--in
particular, the requirements to create and provide a certified list of
employees and their paid sick leave balances, as well as a
recordkeeping requirement related to that list--also do not appear in
this Final Rule.
Proposed Sec. 13.5(b)(5) implemented section 2(j) of the Executive
Order by providing that nothing in the Order or part 13 required a
contractor to make a financial payment to an employee for accrued paid
sick leave that has not been used upon a separation from employment.
Although the Executive Order does not prohibit a contractor from making
such payments should the contractor so choose, under the proposed
regulatory text, doing so (whether voluntarily or pursuant to a CBA)
would not affect that contractor's obligation to reinstate any accrued
paid sick leave upon rehiring the employee within 12 months of the
separation pursuant to Sec. 13.5(b)(4). In other words, under proposed
Sec. 13.5(b)(5), a contractor could not avoid the requirement to
reinstate paid sick leave when it rehires an employee by cashing out
the leave at the time of the original separation from employment. The
proposed interpretation was consistent with the Department's
understanding that the Executive Order is meant to ensure that
employees of Federal contractors have access to paid sick leave rather
than its cash equivalent. The Department requested comments, however,
regarding the impact of the proposed provision on contractors and
employees, as well as the incidence of cash-out for paid time off or
paid sick time under contractors' current policies or relevant CBAs.
[[Page 67632]]
StrategicHealthSolutions, LLC, NECA, the SBLC, the American
Benefits Council, Vigilant, the Chamber/IFA, and NAM all commented that
if a contractor pays an employee for accrued, unused paid sick leave,
that contractor should no longer have the obligation to reinstate such
leave if the employee returns to employment on a covered contract.
EEAC, PSC, and Delta wrote more specifically that contractors subject
to State or local laws requiring payment to employees for unused paid
sick time should not have to reinstate such leave; and EEAC and DLA
Piper suggested that contractors party to a CBA that requires payment
to employees for unused leave should not have to reinstate such leave.
The Building Trades, AFL-CIO, and A Better Balance similarly asked that
employees be able to receive the cash value of unused paid sick leave
upon separation from employment rather than have leave reinstated,
although they suggested that the employee, rather than contractor,
decide whether to exercise that option.
In light of these comments, the Department is modifying the
regulatory text to provide that if a contractor makes a financial
payment to an employee for accrued paid sick leave that has not been
used upon a separation from employment, that contractor is no longer
obligated to comply with the reinstatement of paid sick leave
requirement in Sec. 13.5(b)(4). This relief from the reinstatement
obligation also applies regardless of the contractor's reason for
making the payment--that is, whether it is required by State or local
law, mandated by a CBA, or a voluntary decision. It applies only if the
payment is in an amount equal to or greater than the value of the pay
and benefits the employee would have received pursuant to Sec.
13.5(c)(3) had the employee used the paid sick leave. Pursuant to the
Executive Order itself, the Department is not changing the portion of
the provision that notes a contractor is not required by the Order or
part 13 to make such a payment. The Department is neither requiring
contractors to allow employees to choose whether to accept payment for
unused paid sick leave nor prohibiting contractors from giving
employees such a choice.
Proposed Sec. 13.5(c) described the purposes for which an employee
may use paid sick leave, thereby implementing section 2(c) of the
Executive Order, and addressed the calculation of the use of paid sick
leave.
Proposed Sec. 13.5(c)(1) required, subject to the conditions
described in Sec. 13.5(d) and (e) and the amount of paid sick leave
the employee has available for use, a contractor to permit an employee
to use paid sick leave to be absent from work for that contractor on or
in connection with a covered contract for four reasons. The Department
received only positive comments regarding the four proposed provisions
describing the reasons for leave--in particular, CLASP, Caring Across
Generations, Demos, the Working Families Organization, NELP, the CAP
Women's Initiative, Jobs With Justice, Young Invincibles, Lift
Louisiana, the National Hispanic Council on Aging, the National Council
of Jewish Women, and the Coalition on Human Needs, among others,
supported the enumerated uses of paid sick leave--and it adopts that
list as proposed.
First, Sec. 13.5(c)(1)(i) permits an employee to use paid sick
leave if she is absent because of her own physical or mental illness,
injury, or medical condition. As noted in the NPRM and discussed above,
these terms, defined in Sec. 13.2, are meant to be understood broadly.
Second, Sec. 13.5(c)(1)(ii) permits an employee to use paid sick
leave if she is absent because she is obtaining diagnosis, care, or
preventive care from a health care provider. The Department also
interprets the terms obtaining diagnosis, care, or preventive care from
a health care provider and health care provider, defined in Sec. 13.2
and discussed above, broadly.
Third, Sec. 13.5(c)(1)(iii) permits an employee to use paid sick
leave if she is absent because she is caring for her child, parent,
spouse, domestic partner, or any other individual related by blood or
affinity whose close association with the employee is the equivalent of
a family relationship who has any of the conditions or needs for
diagnosis, care, or preventive care referred to in Sec. 13.5(c)(1)(i)
or (ii) or is otherwise in need of care. The terms child, parent,
spouse, domestic partner, and individual related by blood or affinity
whose close association with the employee is the equivalent of a family
relationship are defined in Sec. 13.2. As the Department explained in
the NPRM, it understands the use of these terms in the Executive Order
to be an indication that the category of individuals for whom an
employee can use paid sick leave to care is expansive. As also noted in
the NPRM, the individual for whom the employee is caring could have any
of the broadly understood conditions or needs referred to in Sec.
13.5(c)(1)(i) or (ii). For example, an employee may use paid sick leave
to be with a child home from school with a cold or to accompany his
spouse to an appointment at a fertility clinic.
This provision also refers to an individual who is ``otherwise in
need of care,'' language that appears in section 2(c) of the Executive
Order. In the NPRM, the Department interpreted this phrase to refer to
non-medical caregiving for an individual who has a general need for
assistance related to the individual's underlying health condition,
noting as an example that an employee may use paid sick leave to
provide his grandfather, who has dementia, unpaid assistance with
bathing, dressing, and eating if the grandfather's usual paid personal
care attendant is unable to keep her regular schedule. AARP supported
the Department's inclusion of care for older adults, and the Department
reiterates its interpretation here.
Fourth, Sec. 13.5(c)(1)(iv) permits an employee to use paid sick
leave if the absence is because of domestic violence, sexual assault,
or stalking, if the time absent from work is for the purposes otherwise
described in Sec. 13.5(c)(1)(i) or (ii) or to obtain additional
counseling, seek relocation, seek assistance from a victim services
organization, take related legal action, including preparation for or
participation in any related civil or criminal legal proceeding, or
assist an individual related to the employee as described in Sec.
13.5(c)(1)(iii) in engaging in any of these activities. The terms used
in Sec. 13.5(c)(1)(iv) (domestic violence, which includes the terms
spouse, domestic partner, intimate partner, and family violence; sexual
assault; stalking; obtain additional counseling, seek relocation, seek
assistance from a victim services organization, or take related legal
action; victim services organization; and related legal action or
related civil or criminal legal proceeding) are defined in Sec. 13.2
and interpreted broadly in keeping with the purpose of ensuring that
victims of domestic violence, sexual assault, or stalking are able to
obtain the care, safety, and legal protections they need without losing
wages or their jobs and that employees can assist such victims who are
family members or like family in doing so.
For example, as noted in the NPRM, an employee who is a victim of
domestic violence could use a day of paid sick leave to prepare for a
meeting with an attorney, travel to the attorney's office, have the
meeting to discuss her legal options, and travel home; a victim could
use a day of paid sick leave to go to a courthouse to determine the
process for filing a petition for a civil protection order, complete
any necessary paperwork, and file that paperwork with the court and use
another full day to
[[Page 67633]]
attend proceedings at the court in support of that application,
including mandatory mediation. For this purpose, assisting another
individual who is a victim of domestic violence, sexual assault, or
stalking includes, but is not limited to, accompanying the victim to
see a health care provider, attorney, social worker, victim advocate,
or other individual who provides services the victim needs as a result
of the domestic violence, sexual assault, or stalking. If the
individual the employee is assisting is a minor victim of domestic
violence or child sexual abuse, the employee could use paid sick leave
to, for example, seek legal protections for the victim (including
filing a police report and/or seeking a civil protection order),
medical treatment for the victim, or emergency relocation services.
As the Department explained in the discussion of proposed Sec.
13.5(c)(1) in the NPRM, use of paid sick leave is contractor, rather
than contract, specific, meaning that an employee who has accrued paid
sick leave working on or in connection with one covered contract could
use the leave for time she would otherwise have been working on or in
connection with another covered contract for the same contractor. For
example, if an employee had accrued 4 hours of paid sick leave over the
course of several pay periods during which he worked for a single
contractor in connection with one covered contract for 60 hours and
another two covered contracts for 30 hours each, he could use his
accrued paid sick leave during time he was scheduled to perform work in
connection with any of the three contracts, or any other covered
contract, on behalf of the same contractor. This explanation applies to
the provision as adopted.
The Department also noted in the NPRM that under proposed Sec.
13.5(c)(1), an employee need only be permitted to use paid sick leave
during time the employee would otherwise have spent working on or in
connection with a covered contract rather than time spent performing
other work (such as on a private contract), even if that work is for
the same contractor. Numerous commenters, including the National
Partnership, A Better Balance, CPD, and the National Council of Jewish
Women, Greater New Orleans Section, asked that the Department amend
this portion of the provision to require contractors to allow employees
to use paid sick leave at any time, regardless of whether they would
otherwise have been performing work on or in connection with a covered
contract, asserting the Department's proposed system would be difficult
to administer. Although the Department is sympathetic to the
commenters' concerns, it does not believe it is appropriate given the
limits of the Executive Order's scope to require that contractors
permit employees to use paid sick leave at times they would not be
performing work on or in connection with a covered contract. The
Department notes, however, that as explained in the discussion of the
anti-interference provision in Sec. 13.6(a) below, a contractor is
prohibited from scheduling an employee's covered and non-covered work
for the purpose of preventing an employee from using paid sick leave.
Relatedly, the Hawaii Employers Council posed a question regarding
the implications of an employee's using paid sick leave on a day when
he would have worked for half the day on a covered contract and half
the day on a non-covered contract. The Department clarifies that the
contractor would be obligated, provided all other relevant requirements
are met, to allow the employee to use paid sick leave for the portion
of the day during which she would have been working on the covered
contract. In the absence of another requirement (such as one imposed by
a CBA, a State or local paid sick time law, or the FMLA) and if the
employer has records or other proof adequately segregating the time the
employee is performing the non-covered work, it is at the employer's
discretion how to address the employee's need for leave during the
remainder of the day.
The Department has modified the text of Sec. 13.5(c)(1) to provide
that a contractor must permit an employee to use paid sick leave to be
absent from work for that contractor during time the employee would
have been performing work on or in connection with a covered contract
or, if the contractor estimates the employee's hours worked in
connection with such contracts for purposes of accrual, during any work
time. Two aspects of this language are notable. First, as in the
proposed text, this language does not prohibit an employer from
permitting employees to use paid sick leave during time they would have
been performing non-covered work, an approach that AGC and Roffman
Horvitz suggest may be particularly suitable for covered construction
contractors whose workforces may move regularly between covered and
non-covered work. A contractor may choose to do so, and the Department
clarifies, in response to ABC's comment, that a contractor would not be
penalized for doing so; specifically, if a contractor has a more
generous policy regarding when employees may use paid sick leave than
is necessary under the Order and part 13 such that, for example, an
employee could use all 56 hours of his accrued paid sick leave during a
period when he was working exclusively on a private contract, the
contractor is not obligated to provide any additional paid sick leave
for use during time the employee spends performing work on or in
connection with covered contracts.
Second, the revised language provides that if a contractor chooses
to estimate rather than track the amount of time an employee spends
performing work in connection with covered contracts as permitted by
Sec. 13.5(a)(1)(i) or (iii), that contractor must permit the employee
to use her paid sick leave at any time she would have been working for
the contractor. As explained in the NPRM, if a contractor wishes to
distinguish an employee's covered and non-covered time for purposes of
(accrual and) use of paid sick leave, it is the contractor's
responsibility to keep adequate records distinguishing between an
employee's covered and non-covered work, and any denial of a request to
use paid sick leave because the leave would occur while an employee is
performing work that is not covered by Executive Order 13706 or part 13
must be supported by records or other proof demonstrating that fact.
The implication of choosing to calculate an employee's paid sick leave
based on an estimate rather than track actual covered and non-covered
hours worked is that the contractor does not have proof of the actual
time the employee spends performing covered work, and therefore it
would not be possible for the contractor to properly restrict the
employee's use of paid sick leave to that time.
Finally, the Department notes that as explained in the NPRM, if an
employee falls within the 20 percent of hours worked exclusion created
by Sec. 13.4(e) for some workweeks but not others, the employee must
be permitted to use paid sick leave at any time the employee would have
been working on or in connection with covered contracts (or, if the
contractor estimates the employee's hours worked in connection with
such contracts for purposes of accrual, during any work time),
regardless of whether that time falls during a workweek in which the
exclusion applies with respect to accrual. As explained in the proposed
rule, this approach was designed to avoid complications that would
otherwise arise in responding to requests to use paid sick leave
accrued by such employees. Specifically, an employee could request to
use paid sick leave during a week in which it was not clear at the time
of the request (because it would not be known until the end of
[[Page 67634]]
the week) whether the employee met the 20 percent threshold; under this
approach, in such circumstances, the contractor must permit the use of
paid sick leave (assuming all relevant requirements for use are met)
rather than deny the request or provide an uncertain response to the
employee.
Proposed Sec. 13.5(c)(2) required a contractor to account for an
employee's use of paid sick leave in increments of no greater than 1
hour. In other words, under the proposal, although a contractor was
permitted to choose to allow employees to use paid sick leave in
increments of smaller than 1 hour (such as half an hour or 15 minutes),
it was not permitted to require employees to use paid sick leave in
increments of any more than 1 hour. The NPRM explained that, for
example, if an employee needs to be an hour late for work because he
accompanied his sister to a chemotherapy appointment that morning, his
employer must permit him to use 1 hour of paid sick leave (rather than,
for instance, requiring him to take a full day off or use a full day's
leave).
Several commenters asked that the Department amend this provision:
EEAC asked the Department to make the minimum increment of leave 4
hours, because scheduling a replacement worker can be difficult if an
employee misses only a short period of work; the SBLC suggested that
contractors be permitted to require employees to use a full day of paid
sick leave if they request to use more than 75 percent of their
normally scheduled work hours; A4A asked that the minimum increment for
airline flight crew employees be 1 day; and the American Benefits
Council noted that it would be expensive for contractors that currently
track attendance in greater increments to implement this requirement.
The United Food and Commercial Workers International Union (UFCW), on
the other hand, asked that the Department require contractors to allow
employees to use paid sick leave in increments smaller than 1 hour if
they already keep other time records in fractions of an hour. The
Department has considered each of these suggestions but declines to
adopt any of them. A contractor may limit an employee's accrual of paid
sick leave to 56 hours, or seven 8-hour days, per year. If an employee
were required to use 4 or 8 hours of that leave at a time even when she
only needs to be absent from work for a shorter duration, she would
more rapidly deplete the amount of paid sick leave she has available
for use than if she were permitted to use only the smaller increments
she needed. Furthermore, employees will typically accrue paid sick
leave over time, meaning they will often have far less than 56 hours
available for use. If, for example, an employee who has 10 hours of
paid sick leave available for use needs to leave work on a covered
contract just 1 hour early to take his daughter to a doctor's
appointment, but he could be required to use 4 hours of paid sick
leave, he would then have only 6 hours of paid sick leave--less than a
day--available if the following week his daughter is sick and needs to
stay home from school. Such outcomes would not advance the purposes of
the Executive Order because they would make the paid sick leave benefit
less meaningful for employees and could discourage employees from
obtaining preventive health care for themselves and their families. The
Department recognizes, however, that the smaller the minimum increment
of paid sick leave required, the greater potential exists for
administrative burden on contractors; it therefore declines to require,
although it continues to allow, contractors to account for paid sick
leave in increments smaller than 1 hour.
Proposed Sec. 13.5(c)(2)(i) explained that a contractor could not
reduce an employee's accrued paid sick leave by more than the amount of
leave the employee actually takes, and a contractor could not require
an employee to take more leave than is necessary to address the
circumstances that precipitated the need for the leave, provided that
the leave is counted using an increment of no greater than 1 hour. This
language was based on FMLA regulations regarding the use of FMLA leave.
See 29 CFR 825.205(a). The Department explained in the NPRM that this
provision means that if a contractor chooses to waive its increment of
leave policy in order to return an employee to work--for example, if an
employee arrives a half hour late to work because he was at an
appointment with a psychologist and the contractor waives its normal 1-
hour increment of leave and puts the employee to work immediately--the
contractor would be required to treat the employee as having used no
more than the amount of leave the employee actually used, half an hour.
See 78 FR 8867 (discussing relevant language codified in 29 CFR
825.205(a)). Under no circumstances could a contractor treat an
employee as having used paid sick leave for any time that employee was
working. The Department received no comments regarding Sec.
13.5(c)(2)(i) and adopts it as proposed, but with minor, non-
substantive edits for consistency with language used in other
provisions.
Proposed Sec. 13.5(c)(2)(ii) explained that the amount of paid
sick leave used could not exceed the hours an employee would have
worked if the need for leave had not arisen. For example, as explained
in the NPRM, if an employee is scheduled to work from 9am to 3pm, and
she is absent from work from 10:30am to 12:30pm to take her father to a
doctor's appointment, a contractor could deduct no more than 2 hours of
paid sick leave from her accrued paid sick leave. Similarly, if the
employee is scheduled to work from 9 a.m. to 3 p.m. and she is absent
from work for the entire day to care for her sick child, a contractor
may deduct no more than 6 hours of paid sick leave from her accrued
paid sick leave. Further, the NPRM noted, if an employee is using paid
sick leave at a time when she could have worked beyond her scheduled
hours but would not have been required to do so, the contractor could
not treat the employee as having used paid sick leave for those
optional hours. For example, if an employee scheduled to work from 9
a.m. to 3 p.m. could have chosen to stay until 7 p.m. that night to
earn overtime, but she was absent for the entire day, a contractor
could not deduct more than 6 hours of paid sick leave from her accrued
paid sick leave. The proposed provision was consistent with the FMLA
regulation at 29 CFR 825.205(c) (``Voluntary overtime hours that an
employee does not work due to an FMLA-qualifying reason may not be
counted against the employee's FMLA leave entitlement.''). In response
to comments from AAR and Delta, the Department clarifies that these
examples were meant to distinguish voluntary overtime from mandatory
overtime; if an employee was scheduled to work from 9am to 7pm and was
absent for the entire day, he would have used (and, pursuant to Sec.
13.5(c)(3), must receive regular pay and benefits for) 10 hours of paid
sick leave regardless of whether a portion of that time would have
constituted overtime. The Department did not receive requests to amend
Sec. 13.5(c)(2)(ii) and adopts it as proposed.
In the NPRM, the Department requested comments regarding whether it
should add a physical impossibility exception, as exists under the FMLA
regulations at 29 CFR 825.205(a)(2), to the 1-hour minimum increment
requirement. Under such a provision, in situations in which an employee
is physically unable to access the worksite after the start of the
shift or to depart from the workplace prior to the end of the shift, a
contractor would be permitted to require the employee to continue to
use paid sick leave for as long as the physical impossibility
[[Page 67635]]
remains. Examples that arise in the FMLA context are flight attendants
whose scheduled flight departs, train conductors whose scheduled train
departs, and laboratory technicians who work in ``clean rooms'' that
must remain sealed. The Department sought comment regarding the
categories of covered contracts and employees entitled to paid sick
leave under Executive Order 13706 and part 13 with respect to which
similar circumstances could arise and the implications of a physical
impossibility provision for contractors and employees who perform on or
in connection with those contracts.
AAR, A4A, Delta, EEAC, and the SBLC asked that the Department
include a physical impossibility exception to the minimum increment set
forth in Sec. 13.5(c)(2). Based on these requests, the Department has
included such a provision, modeled on the language of the analogous
FMLA provision, as Sec. 13.5(c)(2)(iii). The new language provides
that if it is physically impossible for an employee using paid sick
leave to commence or end work mid-way through a shift, such as if a
flight attendant or a railroad conductor is scheduled to work aboard an
airplane or train, or a laboratory employee is unable to enter or leave
a sealed ``clean room'' during a certain period of time, and no
equivalent position is available, the entire period that the employee
is forced to be absent constitutes paid sick leave. The period of the
physical impossibility is limited to the period during which the
contractor is unable to permit the employee to work prior to the use of
paid sick leave or return the employee to the same or an equivalent
position due to the physical impossibility after the use of paid sick
leave.
The Department notes that as under the FMLA, this provision is
``intended to make a limited allowance for the practical realities of
the airline, railroad, and other industries with unique workplaces in
which it is physically impossible for employees to leave work early or
start work late.'' Final Rule, The Family and Medical Leave Act,, 78 FR
8833, 8869 (Feb. 6, 2013); see also FOH ]39e01(d)(3) (``The `physical
impossibility' provision is intended to be narrowly construed and
applied only in instances of true physical impossibility.'').
Furthermore, as under the FMLA, ``the physical impossibility rule is
protective of employees who may be subject to disciplinary action
because they need to take leave beyond that required'' by the reason
for which they are using paid sick leave. Id. Under this new provision,
all leave taken due to physical impossibility will count as paid sick
leave. Finally, the Department notes that ``an equivalent position'' as
used in Sec. 13.5(c)(2)(i) has the same meaning described in the FMLA
regulations at 29 CFR 825.215. Therefore, ``[a]n equivalent position is
one that is virtually identical to the employee's former position in
terms of pay, benefits and working conditions, including privileges,
perquisites and status. It must involve the same or substantially
similar duties and responsibilities, which must entail substantially
equivalent skill, effort, responsibility, and authority.'' 29 CFR
825.215(a).
Proposed Sec. 13.5(c)(3) required a contractor to provide to an
employee using paid sick leave the same pay and benefits the employee
would have received had the employee not used paid sick leave. In other
words, while using paid sick leave, employees paid on a salary basis
may not face any deduction in pay, and employees paid hourly must
receive the same hourly rate of pay they would have earned had they
been present at work. In addition, employees must receive the same
benefits while using paid sick leave that they would have were they
present at work; for example, contractors must continue to make
contributions to any fringe benefit plan (such as a health insurance
plan or retirement account) for time employees are using paid sick
leave and count time toward the earning of other benefits (for example,
the accrual of vacation time), although, as explained above, the time
an employee is using paid sick leave does not constitute hours worked
for purposes of paid sick leave accrual. As noted in the NPRM, under
this provision, employees whose wages are governed by the SCA or DBA
would receive the same wages required under those statutes, including
health and welfare and other fringe benefits or the cash equivalent
thereof, as they would have earned had they been present at work
instead of using paid sick leave.
TrueBlue, Inc. posed a question in its comment regarding the proper
rate of pay when an employee uses paid sick leave at a time when she is
earning a different hourly amount that she was when she accrued the
paid sick leave. As explained in the NPRM, an employee who receives
different pay and benefits for different portions of her work (for
example, an employee who works as a carpenter on one DBA-covered
contract and a skilled laborer on another DBA-covered contract on which
she works for the same contractor), the pay and benefits due while the
employee uses paid sick leave is to be determined based on which work
she would have been performing at the time she uses the leave. The
employee's pay rate at the time she accrued the paid sick leave is not
relevant.
Delta asked that the Department amend this provision to state that
employees need not receive premium pay they would otherwise have
received if using paid sick leave, and Vigilant similarly asked the
Department to state that employees receive only straight time, rather
than overtime, pay while using paid sick leave. To provide clarity in
response to these comments, the Department has added the word
``regular'' before ``pay'' in the regulatory text. As indicated in the
regulatory text, this addition is meant to indicate that only payments
that would be included in the calculation of the employee's regular
rate for hours worked under the FLSA (or basic rate for purposes of the
Contract Work Hours and Safety Standards Act, 40 U.S.C. 3701 et seq.
(CWHSSA)) must be provided to an employee using paid sick leave to
fulfill the obligation to provide the same pay to that employee. The
relevant FLSA principles (adopted under CWHSSA, see 29 CFR 5.15(c)) are
set forth at 29 CFR part 778.
AGC indicated that it believed this provision required that
contractors provide employees with their pay and benefits in cash
rather than, for example, as contributions to fringe benefit trust
funds. The Department wishes to clarify it did not intend this result;
employees using paid sick leave must receive the same pay and benefits
they would have had they not been absent from work, and any benefits
should generally be provided in the same manner as an employee receives
them at other times. For example, if a contractor provides its
employees with health insurance coverage by making monthly payments to
a third-party insurer on behalf of each employee, the contractor must
not make any reduction in such payments to account for time an employee
used paid sick leave. Or if a contractor satisfies its DBA health and
welfare requirements by making contributions to a benefit fund of a
certain amount per hour that an employee works on DBA-covered
contracts, it must continue to make the same payments when an employee
is using paid sick leave. To the extent a contractor is unable to
provide the same benefits during time an employee is using paid sick
leave that it does when an employee is working, such as because the
benefit plan to which the contractor makes contributions will not
accept them for non-work time and an amendment to the plan is not
feasible,
[[Page 67636]]
the contractor may instead provide cash or another benefit of the same
or greater value as the benefit it cannot provide. The Department notes
that this exception to the general requirement to provide the same
benefits is limited to circumstances in which doing so is infeasible.
The Department adopts Sec. 13.5(c)(3) essentially as proposed, but
with a minor modification (the words ``had the employee not used paid
sick leave'' are replaced with ``had the employee not been absent from
work'') for technical accuracy.
Proposed Sec. 13.5(c)(4) prohibited a contractor from limiting the
amount of paid sick leave an employee may use per year or at once. In
other words, although a contractor could limit an employee's accrual of
paid sick leave to 56 hours per year, a contractor could not prohibit
the employee from, for example, using 16 hours carried over from the
year 1, accruing 56 additional hours, and then using all 56 hours
accrued in year 2 even though her total use in year 2 would exceed 56
hours. Under the proposed text, an employer also could not limit the
amount of paid sick leave an employee may use at one time. For example,
an employer could not establish a policy prohibiting employees from
using any particular number of hours of paid sick leave in a single
workweek. Similarly, an employer could not deny an employee's request
to use paid sick leave for 2 full days in a row based on the length of
time requested (as long as the employee had accrued sufficient paid
sick leave to cover the time). Seyfarth Shaw, the Chamber/IFA, and the
American Benefits Council strongly encouraged the Department not to
prohibit contractors from setting a limit on use per year, and
specifically asked that the Department allow contractors to limit use
of paid sick leave to 56 hours per year. Seyfarth Shaw suggested in the
alternative than an 80-hour usage cap would be appropriate. The
Department has considered these suggestions but has decided not to
adopt them because the Executive Order does not call for a cap on the
amount of paid sick leave an employee can use in a year but does
effectively create limits on use by allowing for limits on accrual,
which are implemented in Sec. 13.5(b). In light of this reasoning, the
Department is amending the regulatory text to clarify that an
employee's use of paid sick leave may be limited by the amount of paid
sick leave an employee has available for use.
Proposed Sec. 13.5(c)(5) prohibited a contractor from making an
employee's use of paid sick leave contingent on the employee's finding
a replacement worker to cover any work time to be missed or the
fulfillment of the contractor's operational needs. This language
implemented section 2(e) of the Executive Order and made explicit the
important point that the intent of the Executive Order could only be
fulfilled if employees are entitled to use paid sick leave even if the
need for such leave arises at a time that is inconvenient for a
contractor. PSC, AAR, and EEAC urged the Department to indicate in the
regulations that employees should consult with contractors about
scheduling foreseeable paid sick leave, noting that language to that
effect appears in the FMLA regulations. PSC pointed to the difficulties
that would arise if, for example, the four security guards a contractor
sends to a Federal courthouse all request to use paid sick leave for
doctor's appointments on the same morning. Although the Department is
not altering the fundamental premise of this provision, it has amended
the regulatory language in recognition of these commenters' concerns.
Specifically, it has inserted language modeled on 29 CFR 825.302(e),
the FMLA provision to which the commenters referred; the new text
provides that an employee is encouraged to make a reasonable effort to
schedule preventive care or another foreseeable need to use paid sick
leave to suit the needs of both the contractor and employee, and a
contractor may ask an employee to make a reasonable effort to schedule
foreseeable absences for paid sick leave so as to not disrupt unduly
the contractor's operations, but a contractor may not make an
employee's use of paid sick leave contingent on the employee's finding
a replacement worker to cover any work time to be missed or on the
fulfillment of the contractor's operational needs. The Department notes
that because employees will have far less paid sick leave than they do
FMLA leave and because paid sick leave will often involve far less
serious health conditions than are involved when an employee takes FMLA
leave, the risk of disruption is not as high in this context, so no
greater protections for employers are necessary.
Proposed Sec. 13.5(d) implemented section 2(h) of Executive Order
13706 by addressing an employee's request to use paid sick leave.
Proposed Sec. 13.5(d)(1) required a contractor to permit an employee
to use any or all of the employee's available paid sick leave upon the
oral or written request of an employee that includes information
sufficient to inform the contractor that the employee is seeking to be
absent from work for a purpose described in Sec. 13.5(c)(1) and, to
the extent reasonably feasible, the anticipated duration of the leave.
Proposed Sec. 13.5(d)(1) further required the request to be directed
to the appropriate personnel pursuant to a contractor's policy or, in
the absence of a formal policy, any personnel who typically receive
requests for other types of leave or otherwise address scheduling
issues on behalf of the contractor.
The NPRM explained that employees could request paid sick leave by
any oral or written method, including in person, by phone, via email,
or with a note reasonably calculated to provide timely notice of the
employee's intent to take leave, although as explained below, in
response to comments, the Department now notes that a contractor's
policy may provide specific methods of communicating a request.
Additionally, although the request needed to contain sufficient
information for a contractor to determine whether it is a proper use of
paid sick leave, and the contractor could ask questions tailored to
making that determination, the request was not required to contain
extensive or detailed information about the reason for the leave and a
contractor is not permitted to require such information. Specifically,
under the proposed approach, the employee needed only to provide
information sufficient to inform the contractor that she wished to miss
work for a reason that is a permissible use of paid sick leave and was
not required to specify all symptoms or details of the need for leave.
The Department has inserted language to this effect into the regulatory
text, included as part of Sec. 13.5(d)(1)(i), to ensure clarity.
As also noted in the NPRM and now provided in Sec. 13.5(d)(1)(i),
an employee's request to use paid sick leave need not include a
specific reference to the Executive Order or part 13 or even use the
words ``sick leave'' or ``paid sick leave''; this language is modeled
on a portion of the FMLA regulations regarding the content of an
employee's notice to an employer of the need to use FMLA leave. See 29
CFR 825.301(b) (``An employee giving notice of the need for FMLA leave
does not need to expressly assert rights under the Act or even mention
the FMLA to meet his or her obligation to provide notice, though the
employee would need to state a qualifying reason for the needed
leave.''); see also 29 CFR 825.302(c). Under Sec. 13.5(d)(1)(i), an
employee could simply state, for example, that the employee has a cold,
a dentist appointment, or an appointment with an attorney regarding a
domestic
[[Page 67637]]
violence matter. In such cases, a contractor could not ask (for
purposes of approving or rejecting the request to use paid sick leave)
when the cold began or how severe it is, which dentist the employee is
seeing or for what purpose, or for any detail regarding the
circumstances of the domestic violence.
The NPRM further explained that under the proposed provision, an
employee was not required to include in her request extensive details
regarding the employee's relationship with an individual for whom the
employee wished to care in the time absent from work; she only needed
to inform the contractor that she has a family or family-like
relationship with the individual. The Department has added this point
to Sec. 13.5(d)(1)(i) for clarity. As explained in the NPRM, simply
stating, for example, that the employee's son has a stomach bug, the
employee's wife was injured in a car accident, or the employee's father
needs assistance going to a doctor's appointment was sufficient under
this proposed approach. For a request for paid sick leave involving
providing care for an individual related by blood or affinity whose
close association with the employee is the equivalent of a family
relationship, the employee need only assert that a family or family-
like relationship exists, such as by stating that the employee needs to
care for her ill grandmother or needs to accompany a man who is like a
brother to him to a doctor's appointment. As also noted in the NPRM,
although a contractor may ask questions to determine if the use of paid
sick leave is justified, such as inquiring of an employee who asks to
take leave to care for a close friend who was in a car accident whether
that friend is someone whom the employee considers to be like family,
the contractor could not demand intimate details upon receiving a
positive response to such an inquiry. Although the Department
recognizes that paid sick leave is available for only particular uses,
it interprets Executive Order 13706 as intending to provide paid sick
leave in a manner that is not burdensome for employees and does not
allow significant intrusion into their personal lives by their
employers.
The NPRM also explained that under proposed Sec. 13.5(d)(1), the
request to use paid sick leave should provide an estimate of the timing
and amount of such leave needed to the extent reasonably feasible. This
requirement is satisfied by stating that the sick employee hopes only
to be out for 1 day, that the child's dentist appointment is on a
particular date at 10 a.m. and is not anticipated to take more than an
hour, or that the appointment with the attorney related to a domestic
violence matter is on a particular date at 2 p.m. and will likely
continue for the remainder of the work day. The contractor may not hold
an employee to the estimate provided in the request; for example, the
sick employee could return to work in the afternoon if he recovers more
quickly than he expected, and an employee can use more than an hour of
paid sick leave (provided he has more than 1 hour available for use) if
the dentist appointment runs longer than anticipated. To ensure that
this point is clear to the regulated community, the Department has
included it as Sec. 13.5(d)(1)(ii).
Finally, the Department explained in the NPRM that under proposed
Sec. 13.5(d)(1), an employee's request to use paid sick leave would be
acceptable if the employee directs it to the appropriate personnel
pursuant to a contractor's policy or, in the absence of a formal
policy, any personnel who typically receive requests for other types of
leave on behalf of the contractor, such as a supervisor or human
resources department staff. A few commenters addressed the use of an
employer's usual procedures for requesting time off of work. AAR asked
that the Department allow contractors to use their normal procedures;
EEAC asked that the Department explicitly require employees to use a
contractor's policy; Vigilant asked that the Department state it is
usually reasonable to comply with the contractor's call-in policy; and
the UFCW asked the Department to clarify whether a contractor may deny
an employee's request for paid sick leave because the employee failed
to use the contractor's typical procedures.
Because not all contractor policies will comply with the
requirements of the Executive Order (for example, a policy might not
permit an employee to make oral or written requests for leave as
described in section 2(h) of the Order), the Department has not
modified the relevant proposed text, which now appears as Sec.
13.5(d)(1)(iii), in response to these comments; because a contractor's
policy may govern how an employee must make requests to use paid sick
leave, however, the Department provides more detail here about the
provision's meaning. Under the regulatory text as proposed and adopted,
if a contractor has a policy regarding to whom an employee should
submit leave requests, it may require the employee to direct her
request to use paid sick leave to particular personnel pursuant to that
policy. The policy may include particular procedures to use to contact
the specified personnel, such as a designated phone number or email
address, as long as--pursuant to the Executive Order's requirement that
contractors accept ``oral or written'' requests, 80 FR 54698--the
employee may communicate the request by at least one oral and at least
one written method. If the employee directs a request to someone who is
not the individual or individuals identified in the contractor's
policy, the recipient may formally reject the request or explain that
she is without authority to respond to it, in either case informing the
employee of the correct personnel to whom to direct a new request, or
the recipient may forward the request to the correct personnel herself.
Finally, the Department noted in the NPRM that pursuant to
Sec. Sec. 13.5(e)(1)(ii) and 13.25(d), when an employee requests leave
for the purposes described in proposed Sec. 13.5(c)(1)(iv), i.e., for
absences related to being a victim of domestic violence, sexual
assault, or stalking, the contractor shall maintain confidentiality
about the domestic abuse, sexual assault, or stalking, unless the
employee consents or when disclosure is required by law. For
completeness and clarity, the Department has added to the regulatory
text, as Sec. 13.5(d)(1)(iv), a general reference to the
confidentiality requirements described in Sec. 13.25(d), which apply
to information a contractor obtains in the course of receiving requests
to use paid sick leave for any purpose as well as to information an
employee may provide pursuant to the certification and documentation
provisions described below.
Proposed Sec. 13.5(d)(2) provided that if the need to use paid
sick leave is foreseeable, the employee's request shall be made at
least 7 calendar days in advance, whereas if the employee is unable to
request leave at least 7 calendar days in advance, the request shall be
made as soon as is practicable. The term as soon as is practicable is
defined in Sec. 13.2. Proposed Sec. 13.5(d)(2) further provided that
when an employee becomes aware of a need to use paid sick leave less
than 7 calendar days in advance, it should typically be practicable for
the employee to make a request for leave either the day the employee
becomes aware of the need to use paid sick leave or the next business
day, but notes that in all cases, the determination of when an employee
could practicably make a request must take into account the individual
facts and circumstances.
The Department explained in the NPRM that it would consider any
request made on the day the employee becomes aware of the need to take
paid
[[Page 67638]]
sick leave or the following business day to have been made as soon as
was practicable; although it would not presume that requests made
beyond that time frame were made as soon as practicable, the facts and
circumstances of the specific situation could be such that despite the
longer delay, the employee did in fact notify the employer as soon as
was possible and practical. As explained in the NPRM, for example, if
an employee makes an appointment for his daughter to have an annual
exam with her doctor 2 weeks in the future, the employee should ask to
use paid sick leave to take his daughter to the appointment at least 7
calendar days before the date on which it is scheduled. If instead the
nurse at the employee's daughter's school called one afternoon to say
the daughter had a high fever and he needed to take her out of school
right away, he could plainly not have requested leave 7 days in
advance, and he should instead request leave as soon as is practicable.
Depending on the circumstances, such as how much attention the daughter
needed, whether the employee had access to a phone or computer, and/or
whether the person to whom the request would be directed was available,
in this situation, as soon as practicable could be as the employee was
preparing to leave work to get his daughter, when he got home with his
daughter, later that evening (perhaps after she was asleep), or the
next morning (assuming the following day was a business day). If, on
the other hand, the employee himself was in a serious car accident, was
taken to the hospital, and had surgery the next day, he could not
practicably have requested leave the day of the accident or of the
surgery (i.e., the day he became aware of the need for leave or the
following day).
AAR commented that under the FMLA, foreseeable requests for leave
are to be made 30 days in advance, and there is no reason to have a
shorter period of 7 days in the paid sick leave context. But the 7-day
time frame implements section 2(h) of the Executive Order, which
specifically provides that requests be made ``at least 7 calendar days
in advance where the need for the leave is foreseeable,'' so the
Department cannot accept this suggestion. In other words, an employer
may not require notice more than 7 days in advance of the employee's
intent to use leave for a foreseeable purpose. The Department also
notes that because paid sick leave will often involve shorter periods
of absence than FMLA leave, which can be up to 12 weeks in duration, it
will generally not be as difficult for contractors to plan around
employee absences in the paid sick leave context. The Department adopts
Sec. 13.5(d)(2) as proposed but with minor, non-substantive
modifications for clarity.
The NPRM further explained, and the Department reiterates, that if
an employee did not comply with the requirements of Sec. 13.5(d)(2), a
contractor could properly deny the employee's request to use paid sick
leave. For example, if an employee arranges a doctor's appointment for
his son 3 weeks in advance but does not submit a request to use paid
sick leave until 2 days before the appointment, the contractor may
properly deny that request. Denial of the request would not be proper,
however, if the need for leave was not foreseeable and the employee
made the request as soon as was practicable, such as if upon making the
request 2 days in advance, the employee explained that his husband had
planned to take their son to the appointment, but the husband learned
on the morning the employee submitted the request that the husband
would be unavailable at the time of the appointment, and the couple
decided that the employee would have to take the son instead.
Proposed Sec. 13.5(d)(3) addressed a contractor's response to an
employee's request to use paid sick leave. Proposed Sec. 13.5(d)(3)(i)
permitted a contractor to communicate its grant of a request to use
paid sick leave either orally or in writing provided that the
contractor also complied with the requirement in Sec. 13.5(a)(2) to
inform the employee in writing of the amount of paid sick leave the
employee has available for use. The Department did not receive comments
regarding this provision specifically but has modified it to reflect
that Sec. 13.5(a)(2) no longer requires a contractor to inform an
employee of the amount of paid sick leave she has available for use
upon each request to use paid sick leave and to note that a written
communication may be provided electronically, if the contractor
customarily corresponds with or makes information available to its
employees by such means.
Proposed Sec. 13.5(d)(3)(ii) required a contractor to communicate
any denial of a request to use paid sick leave in writing, with an
explanation for the denial. PSC commented that a contractor's denial of
a request to use paid sick leave should not have to be in writing. The
Department is not adopting this suggestion because it believes written
denials are advantageous for both employees and contractors. By
providing the employee with a written statement of the reason for the
denial, the contractor most effectively communicates what types of
requests will be denied in the future and ensures that the WHD has a
written record of the contractor's rationale in the event the employee
were to file an interference complaint. EEAC asked that the Department
be explicit that it considers electronic communication to satisfy this
requirement. The Department believes it is appropriate for a contractor
to communicate denials via electronic means, such as an email or text
message, provided that the contractor customarily corresponds with or
makes information available to its employees by such means; it has
added language to this effect to the regulatory text.
Proposed Sec. 13.5(d)(3)(ii) further provided that denial is
appropriate if, for example, the employee did not provide sufficient
information about the need for paid sick leave; the reason given is not
consistent with the uses of paid sick leave described in Sec.
13.5(c)(1); the employee did not indicate when the need would arise;
the employee has not accrued, and will not have accrued by the date of
leave anticipated in the request, a sufficient amount of paid sick
leave to cover the request (in which case, if the employee will have
any paid sick leave available for use, only a partial denial would be
appropriate); or the request is to use paid sick leave during time the
employee is scheduled to be performing non-covered work. The proposed
text also explained that if the denial is based on insufficient
information provided in the request, such as if the employee did not
state the time of an appointment with a health care provider, the
contractor must permit the employee to submit a new, corrected request.
The Department further proposed that if the denial is based on an
employee's request to use paid sick leave during time she is scheduled
to be performing non-covered work, the denial must be supported by
records adequately segregating the employee's time spent on covered and
non-covered contracts. Seyfarth Shaw commented that this list of
reasons a contractor may properly deny a request to use paid sick leave
is helpful for contractors seeking to avoid accusations of interfering
with employees' rights. The Department appreciates that contractors
must be able to administer paid sick leave in a reasonable manner, and
adopts this text as proposed.
IEC, the American Staffing Association, and TrueBlue, Inc.
requested that the Department permit a contractor to prohibit an
employee from using paid sick leave until the employee has worked for
the contractor for 90 days. Although the Department recognizes that
such a delay may be
[[Page 67639]]
consistent with some contractors' existing practices, the Department
declines to adopt this suggestion for purposes of the Executive Order
because the Order itself provides for no such delay and the Department
believes the purposes of providing access to paid sick leave are best
fulfilled by ensuring that employees have such access throughout their
employment, including early in their tenure with a new employer.
Proposed Sec. 13.5(d)(3)(iii) required a contractor to respond to
any request to use paid sick leave as soon as is practicable after the
request is made. As proposed, it further explained that, although the
determination of when it is practicable for a contractor to provide a
response would take into account the individual facts and
circumstances, it should in many circumstances be practicable for the
contractor to respond to a request immediately or within a few hours.
The proposed provision further explained that in some instances, such
as if it is unclear at the time of the request whether the employee
will be working on or in connection with a covered or non-covered
contract at the time for which paid sick leave is requested, as soon as
practicable could mean within a day or no longer than within a few
days. PSC, the American Benefits Council, and Vigilant objected to the
Department's suggestion that a contractor could respond to a request
immediately or within a few hours; in particular, Vigilant noted that
in many cases, the individual who receives the request would have to
check with the human resources department to determine whether the
employee had paid sick leave available for use before responding to the
employee. The Department does not disagree with the comments but also
does not believe modification of the proposed regulatory text is
necessary. In some circumstances, such as if a contractor with only a
small number of employees who knows they have all accrued some paid
sick leave faces a request from an employee to leave work 1 hour early
because his son is sick, or if a large contractor has an information
technology system in place that allows a supervisor or human resources
professional who handles leave requests to immediately check how much
paid sick leave an employee has available for use, an immediate or very
prompt response will be possible. As the regulatory text acknowledges,
under other circumstances--such as if the human resources office with
paid sick leave accrual information is unreachable at the time the
request is made or the employee's schedule at the time he needs to be
absent is not yet determined--there will be reasons that the response
to a request will necessarily be delayed. The Department does not mean
to, and did not, indicate that a very short time frame for response
will always be required; its language is meant instead to indicate that
employers should respond to requests to use paid sick leave as promptly
as is reasonable under the circumstances.
Proposed Sec. 13.5(e) implemented section 2(i) of the Executive
Order, which addresses certification and documentation for leave of 3
or more consecutive workdays.
Under proposed Sec. 13.5(e)(1)(i), a contractor could require
certification issued by a health care provider to verify the need for
paid sick leave used for the purposes listed in proposed Sec.
13.5(c)(1)(i), (ii), or (iii) only if the employee is absent for 3 or
more consecutive full workdays. Under the proposed provision, a
contractor could not require certification to justify the use of paid
sick leave for any amount of time shorter than 3 consecutive full
workdays. For instance, if an employee is scheduled to work from 9am to
5pm on Monday, Tuesday, and Wednesday, and he is unable to come to work
at all during those times because he is hospitalized due to a severe
infection, his employer could require that he provide certification
issued by a health care provider. On the other hand, if the employee
uses 4 hours of paid sick leave on Monday because his daughter's school
nurse calls in the early afternoon to say his daughter has a fever and
must be taken home, all 8 hours on Tuesday because he stays home with
his ill daughter, and another 2 hours on Wednesday because his daughter
is not well enough to go to school on time, his employer could not
require certification because he has not used paid sick leave for all
of his scheduled time on 3 consecutive full workdays. (The definition
of certification issued by a health care provider appears in Sec.
13.2.) Proposed Sec. 13.5(e)(1)(i) further required the contractor to
protect the confidentiality of any certification as required by Sec.
13.25(d). The Department received no comments specifically regarding
this provision and adopts it as proposed but with a minor correction to
accurately reflect that the use of paid sick leave would be for one of
the purposes described in Sec. 13.5(c)(1)(i), (ii), or (iii), rather
than all of them.
Proposed Sec. 13.5(e)(1)(ii) addressed documentation to verify the
use of paid sick leave for the purposes listed in Sec. 13.5(c)(1)(iv),
i.e., for absences related to domestic violence, sexual assault, or
stalking. Specifically, it permitted a contractor to require
documentation from an appropriate individual or organization to verify
the need for such leave only if an employee uses paid sick leave on 3
or more consecutive full workdays for such purposes. The NPRM explained
that such documentation could come from any person involved in
providing or assisting with the care, counseling, relocation,
assistance of a victim services organization, or related legal action,
such as, but not limited to, a health care provider, counselor,
employee of the victim services organization, or attorney. The Women's
Law Project, NWLC, and a group of organizations ``dedicated to
preventing, addressing, and ending domestic violence and sexual
assault'' suggested that the Department move this explanatory text to
the regulation itself to prevent any confusion among contractors about
the broad set of possible sources of acceptable documentation. These
commenters also asked that the Department add clergy members, as well
as family and close friends, to the illustrative list of individuals
who can provide the documentation, and that the Department permit self-
certification because there are instances in which an employee has not
told anyone about the domestic violence, sexual assault, or stalking
situation she faces. Because the Department agrees with these
commenters that the broad scope of possible documentation for the
varied and difficult circumstances related to domestic violence, sexual
assault, and stalking was not fully articulated in the proposed
regulatory text, and in the interest of minimizing any burden on
victims who wish to limit the number of people to whom they reveal
information about the situations they are facing, the Department has
modified the text of Sec. 13.5(e)(1)(ii) to incorporate each of these
suggestions. The Department notes that the paid sick time laws in
Massachusetts and Seattle also permit self-certification when leave is
used for purposes like those described in Sec. 13.5(c)(1)(iv). See 90
Mass. Code Regs. 33.06(2)(b)(vi); Seattle, Wash. Mun. Code Sec.
14.16.030(F)(2)(d).
Proposed Sec. 13.5(e)(1)(ii) also provided that a contractor may
only require that such documentation contain the minimum necessary
information establishing the need for the employee to be absent from
work. This portion of the provision was not the subject of any comments
and is adopted as proposed. As explained in the NPRM, the documentation
could, for example, consist of a note from a social worker at
[[Page 67640]]
a victim services organization stating that the employee received
services from the organization related to being a victim of domestic
violence and moved to a new home for reasons related to the domestic
violence, as well as a receipt from a moving company or a note from a
landlord that indicates the date(s) of the move; it need not name the
perpetrator of the domestic violence, the nature of the acts that
constitute domestic violence, the addresses of the old or new homes, or
any other details beyond those sufficient to make clear that the time
was used for a purpose that justifies the use of paid sick leave. As
another example, documentation could consist of a letter from a legal
services attorney or sexual assault victim advocate who is assisting an
employee who is a victim of sexual assault in completing the paperwork
related to and filing for a civil protection order or restraining
order, explaining that the employee spent time (consisting of most
business hours over 3 consecutive days) with the attorney or advocate
preparing for the hearing, including completing the petition for the
court's order and obtaining a time for the hearing as well as attending
the hearing, including waiting at the courthouse and attending the
proceedings; the letter would not need to explain the circumstances of
the sexual assault, name the person(s) accused of the sexual assault,
or otherwise provide any details beyond those sufficient to justify the
need to use paid sick leave. Similarly, if the employee used 3 or more
consecutive full workdays of paid sick leave to fly across the country
to be with her daughter who is a victim of sexual assault to provide
support related to an administrative hearing at the university the
daughter attends, documentation could consist of the boarding passes
from the employee's plane flights and emails from a university official
to the daughter setting the date of the hearing, without providing
details about the specific subject matter of the hearing.
Proposed Sec. 13.5(e)(1)(ii) prohibited a contractor from
disclosing any verification information and reiterated that the
contractor must maintain confidentiality about the domestic abuse,
sexual assault, or stalking as required by Sec. 13.25(d). This
sentence is adopted as proposed.
PSC and AGC urged the Department to permit contractors to request
certification for leave of less than 3 days if an employee's use of
paid sick leave occurs in a pattern that the employer believes suggests
abuse (such as if an employee repeatedly uses paid sick leave on
Fridays or Mondays). Because the Executive Order provides that a
contractor may only require certification or documentation if an
employee is absent for 3 or more consecutive days, 80 FR 54698, the
Department declines to adopt the suggestion that in some circumstances,
contractors be permitted to require certification or documentation for
shorter periods of leave. The Department further addresses suspected
abuse of paid sick leave by employees, including by noting that
contractors may investigate such situations, in the discussion of Sec.
13.6 below.
Proposed Sec. 13.5(e)(2), which was derived from the FMLA
regulations at 29 CFR 825.122(k), provided that if certification or
documentation is to verify the illness, injury, or condition, need for
diagnosis, care, or preventive care, or activity related to domestic
violence, sexual assault, or stalking of an individual related to the
employee as described in Sec. 13.5(c)(1)(iii), a contractor could also
require the employee to provide reasonable documentation or a statement
of the family or family-like relationship. Proposed Sec. 13.5(e)(2)
further explained that this documentation could take the form of a
simple written statement from the employee or could be a legal or other
document proving the relationship, such as a birth certificate or court
order. EEAC noted its approval of this proposed requirement, and the
Department adopts it as proposed. As noted in the NPRM, like under the
FMLA, such a written statement from the employee need not be notarized.
Additionally, a contractor is entitled to examine any legal or other
documentation provided, but the employee is entitled to the return of
any official document submitted for this purpose, such as a birth
certificate. The Department also notes that if an employee has already
submitted proof of a family or family-like relationship to the
contractor for some other purpose, such as providing a marriage
certificate in order to obtain health care benefits for the employee's
spouse, such proof is sufficient to confirm the family relationship for
purposes of paid sick leave, and the contractor may not require
additional documentation.
Proposed Sec. 13.5(e)(3) addressed timing with respect to
certification and documentation. Proposed Sec. 13.5(e)(3)(i) allowed a
contractor to require certification or documentation only if the
contractor informs an employee before the employee returns to work that
certification or documentation would be required to verify the use of
paid sick leave if the employee is absent for 3 or more consecutive
full workdays. The Department viewed this time limit as necessary
because without notice at the time the employee or individual cared for
by the employee has the condition or need justifying the use of paid
sick leave, it could become difficult or even impossible for the
employee to obtain certification. For example, if an employee has the
flu for 4 days, without knowing that the contractor wishes her to
provide certification from a health care provider verifying that she
was sick, she might well recover fully without contacting a doctor. The
Department further explained in the NPRM but not the regulatory text
that a contractor's general policy, if made clear to employees (such as
in an employee handbook), requiring certification of the use of paid
sick leave for absences of 3 or more consecutive full workdays would
suffice to meet this requirement.
The AFL-CIO was generally supportive of this provision. Other
commenters had conflicting views regarding whether notification in an
employee handbook should be sufficient to meet this obligation: EEAC
asked that a statement that such notice would fulfill this requirement
appear in the regulatory text, whereas the Center for WorkLife Law
suggested that the Department disallow such general notice but instead
require actual notice to an employee at the time the employee is using
leave (a requirement that would be consistent with the analogous FMLA
provision, 29 CFR 825.305(a), which provides that ``[a]n employer must
give notice of a requirement for certification each time a
certification is required'').
Because the Department recognizes both the importance of employees
being notified of the need to acquire certification or documentation
and the potential burden on contractors that would be associated with
informing each employee of its policy each time she requested to use
leave, the Department is addressing these comments by adding to Sec.
13.5(e)(3) a statement that the contractor may inform an employee of
this requirement each time the employee requests to use or does use
paid sick leave, or the contractor may inform employees of a general
policy to require certification or documentation for absences of 3 or
more consecutive full workdays if it does so in a manner reasonably
calculated to provide actual notice of the requirement to employees.
Whether employees have received actual notice will depend on the
particular circumstances, but in general, the Department will not
consider simply including an explanation of the requirement in a
lengthy handbook to be sufficient to show the employer has ensured that
its
[[Page 67641]]
employees had actual notice. Explaining the policy orally when an
employee is hired, reiterating the policy periodically in email
reminders or at human resources trainings, and including it in an
employee handbook to which the employee can refer at later dates,
however, would satisfy the actual notice requirement, as would
prominently posting the policy on a Web page from which employees can
submit electronic requests to use paid sick leave.
Under proposed Sec. 13.5(e)(3)(ii), a contractor could require the
employee to provide certification or documentation within 30 days of
the first day of the 3 or more consecutive full workdays of paid sick
leave but could not set a shorter deadline for its submission. This
requirement is set forth in section 2(i) of the Executive Order. 80 FR
54698. No commenter addressed it, and it is adopted as proposed.
Proposed Sec. 13.5(e)(3)(iii) addressed the period between an
employee's using paid sick leave for which a contractor properly
requires certification or documentation and the employee's submission
of such certification and documentation, as well as how a contractor
can respond to insufficient certification or documentation. It is
adopted largely as proposed, but with modifications as described.
First, proposed Sec. 13.5(e)(3)(iii) required that while a contractor
is waiting for or reviewing certification or documentation, it must
treat the employee's otherwise proper request for 3 or more consecutive
full workdays of paid sick leave as valid. Vigilant asked that the
Department change this provision such that the contractor would not
treat an employee's absence as paid sick leave until after receiving
sufficient certification or documentation. The Department recognizes
that because it is not possible to immediately resolve the issue of
whether an employee's absence of 3 or more days from work is properly
treated as time using paid sick leave, either the contractor or the
employee must bear the risk of an incorrect assumption while the
determination is pending. Permitting an employer to wait to pay an
employee for the time would create a significant deterrent to the use
of paid sick leave at times when an employee's need is likely greatest
(because relatively longer leave will often be for an acute or severe
issue). For these reasons, and because recoupment of payments made for
paid sick leave after a proper retroactive denial of that leave is
permitted under the Order and part 13 in the circumstances explained
below, the Department believes it is more appropriate to ensure that
the employee receives the pay and benefits she would have earned had
she been working than to delay such payment to the employee.
Proposed Sec. 13.5(e)(3)(iii) also explained that if the
contractor ultimately does not receive certification or documentation,
or if the certification or documentation the employee provides is
insufficient to verify the employee's need for paid sick leave, the
contractor could, within 10 calendar days of the deadline for receiving
the certification or documentation or within 10 calendar days of the
receipt of the insufficient certification or documentation, whichever
occurs first, retroactively deny the employee's request to use paid
sick leave.
The Department explained in the NPRM that certification or
documentation could be insufficient, for example, because it did not
describe a need for leave consistent with the permitted reasons for
using paid sick leave or because, if the leave was for a purpose other
than that described in Sec. 13.5(c)(1)(iv), it was not created or
signed by a health care provider or a health care provider's
representative. The Center for WorkLife Law commented that the
Department should require the contractor to give an employee notice
that her certification or documentation is insufficient and allow her
at least 5 days to cure the deficiency. Because the Department agrees
that it is appropriate to give employees, who will often be unfamiliar
with the rules regarding certification and documentation, a second
chance to justify their use of a substantial portion of their accrued
paid sick leave, the Department has modified the regulatory text to
implement this suggestion. Specifically, Sec. 13.5(e)(3)(iii) now
provides that if an employee provides certification or documentation
that is insufficient to verify the employee's need for paid sick leave,
the contractor shall notify the employee of the deficiency and allow
the employee at least 5 days to provide new or supplemental
certification or documentation. If after 30 days the employee has not
provided any certification or documentation, or if after the 5 or more
days allowed for resubmission the employee has either provided no new
or supplemental certification or documentation or the new certification
or documentation is still insufficient to verify the employee's need
for paid sick leave, the contractor may, within 10 calendar days of the
employee's deadline for providing sufficient certification or
documentation, retroactively deny the employee's request to use paid
sick leave.
Proposed Sec. 13.5(e)(3)(iii) further provided that if the
contractor retroactively rejected the employee's request, the
contractor could recover the value of the pay and benefits the employee
received but to which the employee was not entitled, including through
deduction from any sums due to the employee (e.g., unpaid wages,
vacation pay, profit sharing, etc.), provided such deductions do not
otherwise violate applicable Federal or State wage payment or other
laws. This language was derived from the FMLA regulations regarding the
consequences of an employee's failure to return to work after an
employer paid for health or non-health benefit premiums while an
employee was on FMLA leave. See 29 CFR 825.213(f). If a contractor
retroactively denied an employee's request to use paid sick leave, the
NPRM explained, the contractor was required to reinstate the amount of
paid sick leave the employee was treated as having used to the
employee.
Delta commented that the NPRM did not address a contractor's
options if a State law does not permit recoupment of wages paid and
suggested that the contractor be permitted to treat the absence as paid
sick leave but nevertheless count the absence against the employee in
the contractor's time and attendance policy. The Department does not
agree with this suggestion. If a contractor could properly
retroactively deny an employee's request to use paid sick leave but may
not recoup relevant payments made, the contractor has two options. It
may treat the time as paid sick leave, in which case the contractor
must comply with all of the requirements of the Order and part 13 with
respect to that time, including the prohibitions on interference and
discrimination (that is, it may not count the absence against the
employee under its attendance policy) but the employee will have less
paid sick leave available for use going forward. Or it may elect not to
treat the time as paid sick leave, in which case it may count the
absence against the employee under its attendance policy but it must
restore the hours of paid sick leave the employee attempted to use to
the amount of paid sick leave the employee has available for use. This
portion of the provision is therefore adopted as proposed, except that
the reference to Federal or State wage payment laws has been corrected
to refer to Federal, State, or local wage payment laws.
Proposed Sec. 13.5(e)(4) permitted a contractor to contact the
health care provider or other individual who
[[Page 67642]]
created or signed the certification or documentation only for purposes
of authenticating the document or clarifying its contents and further
explained that the contractor could not request additional details
about the medical or other condition referenced, seek a second opinion,
or otherwise question the substance of the certification. Under the
proposal, authentication meant verifying that the health care provider
or other individual did in fact create or sign the certification.
Clarifying meant asking what illegible handwriting or other unreadable
text says or asking for an explanation of the meaning of words used or
information contained in the certification. Under the proposal, which
was consistent with requirements regarding certification under the
FMLA, see 29 CFR 825.307, a contractor could not ask the health care
provider or other individual who created or signed the certification or
other documentation for more information than necessary to verify that
the employee was justified in using paid sick leave. The specific
information required would vary depending upon the reason for the
leave. For example, as explained in the NPRM, if an employee was home
sick or injured for 3 days, any certification would need to contain
some information about the medical condition (such as that it was the
flu or a badly sprained ankle) to verify that the condition existed and
lasted 3 or more days, but if an employee was a patient in a hospital
for 3 days, the certification would not need to specify the condition
for which the employee was being treated, because he was clearly
receiving care from a health care provider while using paid sick leave.
No commenter suggested modification of this portion of the provision,
and the Department adopts it as proposed.
Proposed Sec. 13.5(e)(4) further required the contractor to use a
human resources professional, a leave administrator, or a management
official if making contact with the health care provider or other
individual who created or signed the certification or documentation.
This requirement was derived from a regulatory provision under the
FMLA. See 29 CFR 825.307(a). The proposed text went on to prohibit the
employee's direct supervisor from contacting the employee's health care
provider unless there is no other appropriate individual who can do so.
The proposed requirement was also based on a similar provision in the
FMLA regulations, 29 CFR 825.307(a), but unlike that provision, it did
not contain a complete prohibition on an employee's direct supervisor
contacting the health care provider. In explaining this distinction,
the Department noted that although the Department sought to protect the
privacy of employees (who might not wish to share personal medical or
other information with a supervisor) to the extent possible, it
recognized that the Executive Order applies to contractors that are not
covered by the FMLA because their businesses are not of the requisite
size, and so it believed the limited proposed exception was necessary.
EEAC commented that it was helpful for the Department to be clear about
who is permitted to seek authentication or clarification. Roffman
Horvitz, on the other hand, believed the proposed provision placed too
many requirements on contractors and should instead describe the
necessary training for seeking authentication or clarification and
allow the contractor to select the person who would complete those
tasks. The Department adopts this portion of the provision as proposed,
noting in response to Roffman Horvitz that the regulatory language
allows contractors significant leeway in determining who may contact
the health care provider or other professional and the limits that it
does create are necessary to protect employees' privacy.
Proposed Sec. 13.5(e)(4) also addressed the Health Insurance
Portability and Accountability Act (HIPAA) Privacy Rule, Pub. L. 104-
191, 110 Stat. 1936 (1996), which governs the privacy of individually
identifiable health information created or held by HIPAA-covered
entities and the requirements of which are set forth at 45 CFR parts
160 and 164. Specifically, it provided that the HIPAA Privacy Rule
requirements must be satisfied when individually identifiable health
information of an employee is shared with a contractor by a HIPAA-
covered health care provider. As is true for purposes of the FMLA, if
an employee's certification is unclear and the employee chooses not to
provide the contractor with authorization allowing the contractor to
clarify the certification with the health care provider (and does not
otherwise clarify the certification), the proposed rule permitted the
contractor to deny an employee's request to use paid sick leave. See 29
CFR 825.307(a). The Department received no requests to change this
language and adopts it as proposed.
Proposed Sec. 13.5(f) addressed the interaction between the paid
sick leave required by Executive Order 13706 and part 13 with other
laws as well as contractors' paid time off policies. Proposed Sec.
13.5(f)(1) implemented section 2(l) of the Executive Order by providing
that nothing in the Order or part 13 excused noncompliance with or
superseded any applicable Federal or State law, any applicable law or
municipal ordinance, or a CBA requiring greater paid sick leave or
leave rights than those established under the Executive Order and part
13. The Department received no comments regarding this provision and
adopts it as proposed.
Proposed Sec. 13.5(f)(2) addressed the interaction between paid
sick leave and the requirements of the SCA and DBA, thereby
implementing section 2(f) of the Executive Order. Proposed Sec.
13.5(f)(2)(i) explained that paid sick leave required by Executive
Order 13706 and part 13 was in addition to a contractor's obligations
under the SCA and DBA, and a contractor would not receive credit toward
its prevailing wage or fringe benefit obligations under those Acts for
any paid sick leave provided in satisfaction of the requirements of
Executive Order 13706 and part 13. The SCA and DBA both provide that
fringe benefits furnished to employees in compliance with their
requirements do not include any benefits ``required by Federal, State,
or local law.'' 41 U.S.C. 6703(2) (SCA); 40 U.S.C. 3141(2)(B) (DBA);
see also 29 CFR 4.171(c) (``No benefit required by any other Federal
law or by any State or local law, such as unemployment compensation,
workers' compensation, or social security, is a fringe benefit for
purposes of the [SCA].''); 29 CFR 5.29 (``The [DBA] excludes fringe
benefits which a contractor or subcontractor is obligated to provide
under other Federal, State, or local law. No credit may be taken under
the [DBA] for the payments made for such benefits. For example,
payment[s] for workmen's compensation insurance under either a
compulsory or elective State statute are not considered payments for
fringe benefits under the [DBA].''). Because paid sick leave provided
in accordance with the Executive Order and part 13 is required by law,
the Department reasoned, consistent with the Executive Order's express
language, that such paid sick leave cannot count toward the fulfillment
of SCA or DBA obligations.
Proposed Sec. 13.5(f)(2)(ii) allowed a contractor to count the
value of any paid sick time provided in excess of the requirements of
Executive Order 13706 and part 13 (and any other law) toward its
obligations under the SCA or DBA in keeping with the requirements of
those Acts. In particular, the NPRM explained that a contractor could
take credit for such paid sick time provided in compliance with the SCA
requirements regarding fringe benefits as described in
[[Page 67643]]
29 CFR 4.170 through 4.177 or with the DBA requirements regarding
fringe benefits as described in 29 CFR 5.20 through 5.32, as
applicable.
Several commenters disagreed with the Department's position as
expressed in Sec. 13.5(f)(2). AGC commented that paid sick leave is a
contractual, rather than legal, requirement and therefore should not be
excluded from a contractor's fulfillment of its DBA fringe benefit
obligations. ABC commented that not giving contractors credit toward
their DBA obligations for the cost of providing paid sick leave amounts
to imposing a double payment penalty on those contractors. PSC urged
the Department to count a contractor's existing paid time off policy
used to satisfy its obligations under the Order and part 13 (as
permitted by Sec. 13.5(f)(5)) toward its SCA obligations. The Building
Trades urged the Department to conclude that if a contractor provides
paid sick leave in a manner sufficient for it to qualify as a ``bona
fide fringe benefit'' for purposes of the SCA or DBA, that contractor
should be permitted to take credit for irrevocable contributions to a
paid sick leave plan toward its SCA or DBA obligations. The Department
does not agree with these commenters' rationales or suggestions. Paid
sick leave is required by Executive Order 13706 and part 13, which are
sources of law, and therefore under the SCA and DBA, as well as the
Order's own terms, it cannot be used to fulfill SCA or DBA obligations.
That result applies regardless of how the contractor satisfies its
obligations under the Order, including by doing so with a paid time off
policy or with a funded plan (which, as newly explicitly noted in Sec.
13.8, described below, is permitted). The Department does not believe
it is inappropriate that DBA (or SCA) contractors will have to comply
with two legal obligations: Fulfilling the requirements of the
Executive Order, which provides employees access to paid sick leave,
and fulfilling the requirements of the DBA (and SCA), which requires
paying employees prevailing wages and fringe benefits. Accordingly,
Sec. 13.5(f)(2) is adopted as proposed.
The Department reiterates that to the extent contractors provide
leave benefits in excess of those required by the Order and part 13,
the value of the excess benefit (if not required under another law) may
be counted toward SCA or DBA obligations. For example, if a contractor
provides paid sick leave pursuant to the Order and part 13 but also
voluntarily provides its employees an additional 16 hours of paid sick
time, the value of that additional 16 hours may be counted toward its
SCA or DBA obligations (to the extent permitted by those statutes and
their implementing regulations). Or if a contractor's paid time off
policy provides more than 56 hours of leave and a contractor tracks and
records the amount of paid time off employees use for the purposes
described in Sec. 13.5(c)(1), the contractor may count paid time off
an employee uses for other purposes toward its SCA or DBA obligations
(to the extent permitted by those statutes and their implementing
regulations). For SCA-covered contracts, such obligations could include
the required health and welfare benefit or required vacation time.
The Chamber/IFA asked how paid sick time that is provided for in a
CBA would be treated under section 4(c) of the SCA, 29 U.S.C. 6707(c),
which generally requires that a successor contractor under the SCA may
not pay service employees less than the wages and fringe benefits they
would have received under a predecessor contractor's CBA. The response
to this question will depend on the terms and circumstances of the paid
leave provided for in the CBA, but will be determined based on two
primary principles. First, ``a[n SCA] contractor may satisfy its fringe
benefit obligations under any wage determination `by furnishing any
equivalent combinations of fringe benefits or by making equivalent or
differential payments in cash' in accordance with [SCA requirements].''
29 CFR 4.163(j). In other words, that a CBA provides for any particular
benefit, such as paid time off, does not mean the successor contractor
subject to a wage determination issued under section 4(c) must provide
that same benefit. Second, benefits that are required by law, including
paid sick leave required by the Executive Order and part 13, cannot
count toward the fulfillment of SCA (or DBA) obligations.
Proposed Sec. 13.5(f)(3) addressed the interaction of paid sick
leave required by Executive Order 13706 and part 13 with the FMLA. It
provided that a contractor's obligations under the Executive Order and
part 13 would have no effect on its obligations to comply with, or
ability to act pursuant to, the FMLA. It further provided that paid
sick leave could be substituted for (that is, may run concurrently
with) unpaid FMLA leave under the same conditions as other paid time
off pursuant to 29 CFR 825.207. It also explained that as to time off
that is designated as FMLA leave and for which an employee uses paid
sick leave, all notices and certifications that satisfy the FMLA
requirements set forth at 29 CFR 825.300 through 825.308 would satisfy
the request for leave and certification requirements of Sec. 13.5(d)
and (e).
For example, although under the Executive Order and part 13 an
employee's request to use paid sick leave need only be made at least 7
days in advance if the need for leave is foreseeable, under the FMLA,
such notice must be made at least 30 days in advance pursuant to 29 CFR
825.302(a). If an employee seeks to use paid sick leave for an FMLA-
qualifying reason (and thus both types of leave will run concurrently),
such as if she needs major surgery, the contractor may require that she
comply with the FMLA's notice requirements, which will satisfy the
requirements of the Executive Order and part 13; specifically, when she
notifies the contractor of the date of her surgery (that is 30 days in
the future or as soon as practicable) and likely recovery period, she
will have complied with the requirements of Sec. 13.5(d) to provide
oral or written notice of a need for leave that justifies the use of
paid sick leave, and the expected duration of the leave, at least 7
days in advance or as soon as practicable.
Similarly, although under the Executive Order and part 13 a
contractor may not require certification of the need to use paid sick
leave unless the employee uses more than 3 consecutive full workdays of
paid sick leave, a contractor is permitted to require certification
from an employee for a shorter period of FMLA-designated leave as
provided in 29 CFR 825.305. If an employee is concurrently using paid
sick leave and FMLA leave, a contractor may require certification as
permitted under the FMLA even if certification for paid sick leave
would not be permitted under Executive Order 13706 and part 13 (such
as, for example, if the employee only needed to use 1 day of leave). If
that certification supported the use of FMLA leave for an employee's
serious health condition, it would be more than sufficient to serve as
the certification issued by a health care provider for use of 3
consecutive full workdays of paid sick leave should such certification
become necessary. Even if the certification was insufficient to
demonstrate that an employee was entitled to use FMLA leave (such as
because although the employee is ill, the illness did not meet the
definition of a serious health condition), it could nevertheless be
sufficient to meet the requirements of the Executive Order and part 13.
The Department received no comments specific to the interaction of paid
sick leave and FMLA leave and
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therefore adopts this provision as proposed.
EEAC asked the Department, presumably in response to the portion of
this provision stating that paid sick leave can run concurrently with
FMLA leave, to state that paid sick leave also runs concurrently with
other types of paid leave. The Department has made clear in Sec.
13.5(f)(4), discussed below, that for purposes of this rulemaking, a
contractor can fulfill its obligation to provide paid sick leave under
the Order and part 13 as well as satisfy the requirements of a State or
local paid sick time law with one type of paid leave that complies with
both the Order and such a law. Nothing in the regulations prohibits a
contractor from fulfilling other legal obligations by providing leave
that also satisfies its obligations under the Executive Order and part
13. (The Department notes, however, that the converse is not
necessarily true: Leave that satisfies a contractor's obligations under
the Executive Order and part 13 may not necessarily satisfy or be used
to satisfy other legal obligations, such as those arising under the SCA
and DBA.)
Proposed Sec. 13.5(f)(4) addressed the interaction of paid sick
leave required by Executive Order 13706 and part 13 with paid sick time
required by State or local law. As proposed, it explained that a
contractor's compliance with a State or local law requiring that
employees be provided with paid sick time does not excuse the
contractor from compliance with its obligations under the Executive
Order 13706 or part 13. It noted, however, that a contractor is
permitted to satisfy its obligations under the Order and part 13 by
providing paid sick time that fulfills the requirements of a State or
local law provided that the paid sick time is accrued and could be used
in a manner that meets or exceeds the requirements of the Order and
part 13.
The American Benefits Council, Seyfarth Shaw, the Chamber/IFA, and
TrueBlue, Inc. asked that the Department provide that a contractor can
fulfill its requirements under the Executive Order and part 13 by
complying with any applicable State or local paid sick time law,
emphasizing the burdens on contractors who would be required to comply
with this Federal requirement in addition to State or local (or
sometimes both) requirements. The Department declines to adopt this
suggestion because it would often result in employees covered by a
State or local paid sick time law having access to less paid sick time,
or paid sick time that is available for fewer uses, than is required
under the Executive Order. Furthermore, contractors have experience
complying with a variety of Federal, State, and local laws, so although
the Department recognizes that contractors operating in States and
localities with paid sick time laws may have greater obligations than
those operating elsewhere, this is not a situation unique to paid sick
time or that is unduly burdensome.
NWLC, the National Hispanic Council on Aging, the Maine Women's
Lobby, UltraViolet Education Fund, and Innovation Ohio suggested that
the Department provide more detail about the ways in which a contractor
must satisfy the requirements of the Executive Order while also
complying with a State or local paid sick time law, in particular by
specifying that a contractor subject to both the Order and a State or
local paid sick time law must provide leave that meets or exceeds the
Order's accrual, use, and other requirements. The Department intended
to make these points in the NPRM, and reiterates them here; it has also
inserted language to this effect into the regulatory text--which is
otherwise adopted as proposed--to be as clear as possible about
contractors' obligations in jurisdictions in which a State or local
paid sick time law applies.
Specifically, as explained in the NPRM, a contractor whose
employees perform work on or in connection with covered contracts in
States, counties, or municipalities that have statutes or ordinances
requiring that employees be provided with paid sick time must comply
with both those laws and the Executive Order. But that contractor would
be permitted, at least for purposes of the Executive Order and part 13,
to fulfill both obligations simultaneously. If, for example, a State
law requires that employees receive up to 40 hours of paid sick time, a
contractor is not necessarily required to provide employees performing
work on or in connection with covered contracts in that State an
additional 56 hours of paid sick leave; if the contractor provides paid
sick time in compliance with both the State law and the Executive Order
and part 13, the contractor need only provide up to 56 hours total of
paid sick leave. (The NYC Department of Consumer Affairs indicated in
its comment that this example would apply to New York City's paid sick
time ordinance.)
The Department further explained in the NPRM that because the
requirements of State and local laws and the Order and part 13 will
rarely be identical, to satisfy both, a contractor will likely need to
comply with the requirements that are more generous to employees. For
example, a contractor could satisfy both a county law that requires
employees to earn at least 1 hour of paid sick time for every 40 hours
worked and the Executive Order by allowing employees to earn 1 hour of
paid sick leave for every 30 hours worked. Or a contractor could
satisfy both a State statute that allows employers to limit employees'
use of paid sick time to 40 hours per year and the Executive Order by
not limiting use per year on a basis other than the amount of leave an
employee has available for use. Similarly, a contractor could satisfy
both a municipal ordinance that does not permit an employer to require
certification of the reason for using paid sick time under any
circumstances and the Executive Order and part 13 by choosing not to
require certification for the use of paid sick time even if an employee
uses such leave for more than 3 consecutive days.
Proposed Sec. 13.5(f)(5) addressed the interaction between the
paid sick leave requirements of Executive Order 13706 and part 13 and
an employer's paid time off policies, explaining first that the Order
and part 13 need not have any effect on a contractor's voluntary paid
time off policy, whether provided pursuant to a CBA or otherwise. The
Department's proposal noted that whether as a practical matter the
requirement to provide paid sick leave under the Order and part 13
affects the amount or types of other leave a contractor provides or a
union negotiates is not an issue within the Department's rulemaking
authority. The Department received no comments specifically addressing
this portion of the provision and adopts it as proposed, though it now
appears as Sec. 13.5(f)(5)(i) because of adjustments to the provision
described below. The timing of the Order's application to employees
whose covered work is governed by a CBA is addressed in Sec. 13.4(f).
Proposed Sec. 13.5(f)(5) also implemented section 2(g) of the
Order by providing that a contractor's existing paid time off policy
(if provided in addition to the fulfillment of SCA or DBA obligations,
if applicable) would satisfy the requirements of the Executive Order
and part 13 if various conditions were met. First, the proposed
provision explained that the paid time off was to be made available to
all employees described in Sec. 13.3(a)(2) (other than those excluded
by Sec. 13.4(e)). Second, under the proposal, employees were to be
permitted to use the paid time off for at least all of the purposes
described in Sec. 13.5(c)(1). Those purposes, described in detail in
the discussion of that provision, are those for which an employee must
be permitted to use paid sick leave: (1) A physical or mental
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illness, injury, or medical condition; (2) obtaining diagnosis, care,
or preventive care from a health care provider; (3) caring for the
employee's child, parent, spouse, domestic partner, or any other
individual related by blood or affinity whose close association with
the employee is the equivalent of a family relationship for the reasons
detailed in the provision; or (4) domestic violence, sexual assault, or
stalking, if the time absent from work is for the purposes detailed in
the provision. Third, the paid time off was to be provided in a manner
and an amount sufficient to comply with the rules and restrictions
regarding the accrual of paid sick leave set forth in Sec. 13.5(a) and
regarding maximum accrual, carryover, reinstatement, and payment for
unused leave set forth in Sec. 13.5(b). Fourth, the paid time off was
to be provided pursuant to policies sufficient to comply with the rules
and restrictions regarding use of paid sick leave set forth in Sec.
13.5(c), requests for leave set forth in Sec. 13.5(d), and
certification and documentation set forth in Sec. 13.5(e), at least
with respect to any paid time off used for the purposes described in
Sec. 13.5(c)(1). Finally, the paid time off was to be protected by the
prohibitions against interference, discrimination, and recordkeeping
violations described in Sec. 13.6 and the prohibition against waiver
of rights described in Sec. 13.7, at least with respect to any paid
time off used for the purposes described in Sec. 13.5(c)(1).
EEAC, the Chamber/IFA, the American Benefits Council, and PSC wrote
that requiring contractors with paid time off policies to comply with
the Executive Order's requirements is too burdensome, and that any paid
time off policy that allows for 56 hours or more of leave should
satisfy a contractor's obligations under the Order regardless of
whether it meets the other requirements for accrual and use of paid
sick leave specified in part 13. Some commenters identified specific
requirements they found problematic: Seyfarth Shaw wrote that being
unable to limit an employee's use of leave during an accrual year would
be challenging for contractors and would lead many of them to abandon
their existing paid time off policies; PSC asked that the recordkeeping
requirements of part 13 not apply to paid time off policies; Delta
wrote that the carryover requirement conflicted with its existing paid
time off policy; and EEAC interpreted the Order to mean that any paid
time off policy that complies with the terms of the Order, which it
distinguished from what it asserted were additional requirements set
forth in part 13, would satisfy a contractor's obligations. The
Chamber/IFA and SHRM/CUPA-HR suggested that the Department identify the
most crucial requirements of the Order and part 13 and permit
contractors with paid time off policies to comply only with those.
SHRM/CUPA-HR also asked for clarification of whether if an employee
uses all of her paid time off for purposes other than those the Order
specifies (such as vacation), the contractor is obligated to provide
additional paid sick leave to that employee.
After careful consideration of these comments, the Department
declines to adopt the commenters' suggestions that contractors with
paid time off policies that provide employees with less than is
required by this rulemaking be excused from complying with the
requirements described in the Order and part 13. The Department
believes the best interpretation of section 2(g) of the Order is that
it allows contractors that already provide paid time off under policies
that are equivalent to or more generous than those described in the
Order and part 13 to avoid an obligation to provide an additional 56
hours of paid sick leave. Thus, employers who make available to
employees entitled to paid sick leave pursuant to the Executive Order
56 hours of paid time off under policies that are equivalent to or more
generous than those described in the Order and part 13 have fulfilled
their obligations, regardless of whether their employees use that paid
leave for the purposes designated by the Order or for other purposes
deemed permissible by their employers, such as vacation. The key to
compliance with the Order and part 13 is that employers with paid time
off policies provide access to no less than 56 hours of paid leave
under the required conditions, and that any such leave used for the
purposes described in Sec. 13.5(c)(1) is covered by the relevant
protections form part 13, not whether employees choose to use their
paid time off for the purposes covered by the Order and part 13. In
this way, the Order and part 13 maintain the flexibility and discretion
that many employers and employees value in paid time off policies.
This flexibility and discretion, however, should not be understood
to excuse contractors that provide paid time off that is not equally
protective of employees' access to paid absences for the reasons
described in Sec. 13.5(c)(1) from fulfilling the requirements of the
Order and part 13. For example, if a contractor offered a paid time off
policy under which each employee had 7 days of paid leave he could use
for any purpose but an employee was required to use a full day of leave
at a time even if he only needed to be absent for an hour to go to a
doctor's appointment, or if the contractor could deny a request to use
leave for any reason, including if the office is busy at the time an
employee's child is sick, that contractor's employees would not have
the meaningful access to paid sick leave the Order and part 13 are
meant to confer and therefore the Department is not adopting
commenters' suggestion that such a policy would fulfill the
contractor's obligations under the Order.
With respect to EEAC's interpretation that the Order requires paid
time off policies to comply with the Order itself but not what it
considers to be additional regulatory requirements (such as
recordkeeping requirements, the requirement to notify employees of the
amount of paid sick leave they have accrued, the requirement to
establish an accrual year, or the requirement not to make impermissible
deductions from the pay and benefits an employee receives when using
paid sick leave), the Department disagrees with the commenter's
premise. The Order contemplates that regulations will be integral to
carrying out its purposes, and accordingly directs the Secretary to
issue regulations that are necessary and appropriate to implement the
Order. 80 FR 54698. Part 13 constitutes the Department's interpretation
of what the Order requires and how contractors will comply with it;
each regulatory provision, rather than being an extraneous or
additional requirement beyond what the Order demands, is a necessary
and appropriate part of a complete scheme to give the Order its full
intended effect. For example, the Order specifically authorizes the
Secretary to include in its implementing regulations requirements
regarding recordkeeping, and the records part 13 requires contractors
to make and maintain will be essential to any WHD investigation of a
possible violation of the Order. In addition, the Order refers to paid
sick leave accrual in the course of a year without defining ``year'';
the definition of and requirements regarding establishing an ``accrual
year'' give contractors the information and instructions they need to
comply with their obligations.
The Department is therefore adopting Sec. 13.5(f)(5) with the
language proposed, which now appears as Sec. 13.5(f)(5)(ii), but it is
also clarifying, as Sec. 13.5(f)(5)(iii) and as discussed here, how
its provisions apply if a contractor's paid time off policy provides
more than 56 hours of leave each year. The Department recognizes that
(1)
[[Page 67646]]
employers often provide paid time off rather than separate vacation and
sick leave because they and their employees value the flexibility
inherent in not distinguishing types of leave and (2) the intent of the
Order was to ensure that employees have access to up to 56 hours of
paid leave for the purposes described in Sec. 13.5(c)(1). Therefore,
the regulatory text now explicitly provides that a contractor
satisfying the requirements of the Executive Order and part 13 with a
paid time off policy that provides more than 56 hours of leave per
accrual year may choose to either (1) provide all paid time off as
described in Sec. 13.5(f)(5)(ii) or (2) track, and make and maintain
records reflecting, the amount of paid time off an employee uses for
the purposes described in Sec. 13.5(c)(1), in which case the
contractor need only provide, for each accrual year, up to 56 hours of
paid time off the employee requests to use for such purposes in
compliance with the Order and part 13.
In other words, to ensure that 56 hours of paid time off is
protected under the Order, if a contractor chooses to track, and make
and maintain records reflecting, the amount of paid time off an
employee uses for the purposes described in Sec. 13.5(c)(1), the
contractor need only provide, for each accrual year, up to 56 hours
that an employee requests to use for such purposes in compliance with
the rules and requirements of the Executive Order and part 13. If a
contractor does not choose to track, and make and maintain records
reflecting, the amount of paid time off an employee uses for the
purposes described in Sec. 13.5(c)(1), all of an employee's requests
to use paid time off for such purposes must be provided in compliance
with the Order and part 13. Regardless of whether a contractor
distinguishes between paid time off used for the purposes described in
Sec. 13.5(c)(1) and paid time off used for other purposes, the
contractor is not required to provide any additional paid sick leave or
paid time off beyond the amount provided by the contractor's paid time
off policy that satisfies the conditions described in Sec. 13.5(f)(5).
For example, assume a contractor provides 120 hours of paid time
off per accrual year. That contractor could decide to track and record
the amount of paid time off each employee uses for the purposes
described in Sec. 13.5(c)(1), meaning that it formally distinguishes
between leave used for such purposes and for other purposes and
maintains documentation designed to ensure that it and each of its
employees know how much paid time off an employee has used for the
purposes described in Sec. 13.5(c)(1) (and therefore how many out of
at least 56 hours per accrual year the employee has remaining for use
subject to the protections of the Order and part 13). If the contractor
made such a choice, an employee who uses 56 hours for the purposes
described in Sec. 13.5(c)(1) early in the accrual year would not be
entitled to Order's protections for her remaining 64 hours of paid time
off regardless of the purposes for which she requests to use them. On
the other hand, an employee who uses 64 hours of paid time off for
other purposes (such as vacation) early in the year would still be
entitled to use any or all of her remaining 56 hours of leave for such
purposes subject to all of the protections required by the Order and
part 13. Under this approach, a contractor must make up to 56 hours of
paid time off per accrual year available for an employee's use for the
purposes described in Sec. 13.5(c)(1), but an employee might not
choose to use any or all of her leave in that manner. For example, an
employee who uses 80 hours of paid time off for vacation early in the
year would only be entitled to use up to 40 remaining hours of leave
for the purposes described in Sec. 13.5(c)(1) subject to the
protections required by the Order and part 13, and if she used those 40
hours for another vacation, she would have no paid leave remaining that
her contractor would be obligated to provide for the purposes described
in Sec. 13.5(c)(1).
If a contractor that provides 120 hours of paid time off chooses
not to track and record the amount of paid time off employees use for
the purposes described in Sec. 13.5(c)(1), its obligations would
differ because it would not have information to demonstrate that an
employee had in fact used her full entitlement to up to 56 hours of
paid leave for the purposes described in Sec. 13.5(c)(1). For example,
if one of the contractor's employees uses 56 hours of leave early in
the accrual year for reasons that the contractor did not document (even
if the contractor was informally aware of those reasons), the employee
would still be entitled to use any or all of her 64 remaining hours of
paid time off for the purposes described in Sec. 13.5(c)(1) subject to
the protections of the Order and part 13.
As these examples demonstrate, whether a contractor chooses to keep
track of the purposes for which paid time off is used determines
whether it may limit the amount of paid time off as to which it must,
if the leave is used for a purpose described in Sec. 13.5(c)(1),
provide all of the protections of the Order and part 13. But whichever
option the contractor selects, it need not provide more paid time off
than it offers in its policy (in this example, 120 hours) per accrual
year irrespective of the purposes for which an employee actually uses
her leave.
Accordingly, Sec. 13.5(f)(5) as adopted still provides that a
contractor's paid time off policy must in significant measure comply
with the requirements of the Order and part 13, but the Department
clarifies that contractors who fulfill their obligations under the
Order and part 13 with a paid time off policy have both the option to
formally distinguish between uses of leave and other flexibilities as
described below. The following discussion offers details regarding how
a paid time off policy used to fulfill a contractor's obligations under
the Order and part 13 could operate.
As noted in the regulatory text and above, to satisfy the
obligations of the Order and part 13, a contractor's paid time off
policy must comply with all of the requirements of Sec. Sec. 13.5(a)
and 13.5(b) or, if the contractor chooses to track and record the
amount of paid time off employees use for the purposes described in
Sec. 13.5(c)(1), the contractor must comply with those provisions with
respect to up to 56 hours per accrual year of paid time off an employee
requests to use for such purposes. The accrual-related requirements of
the Executive Order and part 13 with which a contractor's paid time off
policy must comply include allowing employees to accrue at least 1 hour
of leave for every 30 hours worked (as hours worked are defined for
purposes of the FLSA) without limiting annual accrual at any less than
56 hours and providing leave that accrues at least each pay period or
each month as under Sec. 13.5(a)(1)(ii). A contractor may assume for
purposes of accrual of leave under its paid time off policy that
employees whose hours it is not otherwise required by statute to track
work 40 hours per week as described in Sec. 13.5(a)(1)(iii). A
contractor also has the option of providing employees with at least 56
hours of paid time off at the beginning of each accrual year as
described in Sec. 13.5(a)(3).
A contractor may choose to fulfill its obligations pursuant to
Sec. 13.5(f)(5) with a paid time off policy that provides more leave
than is required, either by allowing for more rapid accrual (for
example, by providing employees who work 80 hours in a pay period with
4 hours of paid time off for each pay period) or by providing more than
56 hours of paid time off at the beginning of each year. It is in these
circumstances that the contractor's choice to track and record the
reasons for which employees
[[Page 67647]]
use leave becomes relevant, as noted throughout this discussion.
The requirement in Sec. 13.5(a)(2) that a contractor notify
employees of the amount of paid sick leave they have accrued also
applies to paid time off policies that fulfill a contractor's
obligations under the Order and part 13. In a circumstance in which a
contractor does not track and record which paid time off an employee
uses for the purposes described in Sec. 13.5(c)(1), the contractor
would comply with this requirement by informing an employee of an
amount of paid time off generally, rather than paid sick leave
specifically, available for use. In other words, because paid sick
leave is typically not designated separately when an employer offers a
paid time off policy, in this context, a contractor need only provide
notice of the amount of paid time off an employee has available for use
no less than once each pay period or each month (whichever interval is
shorter) as well as upon a separation from employment and upon any
reinstatement of leave if an employee is rehired within 12 months. If,
however, a contractor chooses to track and record paid time off used
for the purposes described in Sec. 13.5(c)(1), the contractor would
comply with this requirement by informing an employee of the amount of
paid time off available for use for those purposes with the full
protections required by the Order and part 13. A contractor would be
free to follow its usual policy for informing employees of how much
paid time off they have available overall if that amount differs (or to
adopt any other practice it wished with respect to that time).
Additionally, a paid time off policy used to fulfill a contractor's
obligations under the Order and part 13 must allow carryover of leave
from the previous accrual year as provided in Sec. 13.5(b)(2). But a
contractor need only allow carryover of up to 56 hours of paid time off
even if its policy provides more than 56 hours of leave, although this
requirement applies differently depending on whether a contractor
chooses to track and record the amount of paid sick leave an employee
uses for the purposes described in Sec. 13.5(c)(1). For example,
assume that under a particular contractor's paid time off policy,
employees who regularly work 8-hours days, 5 days per week accrue a
half day of paid time off each semi-monthly pay period, so they receive
12 days total per year, and the contractor does not track and record
the reason the employee uses paid time off. If one employee used all 12
days in year 1 (for vacation, the purposes described in Sec.
13.5(c)(1), or some combination of both), she would not carry over any
paid time off into year 2. If another employee used 7 days in year 1
(for any purpose), a contractor would be required to permit her to
carry over her remaining 5 days into year 2. If a third employee used
no paid time off in year 1, however, the contractor would only be
required to allow her to carry over 7 of her 12 days into year 2.
(Consistent with Sec. 13.5(b)(3), a contractor may choose to limit an
employee's additional accrual in year 2 until she has less than 7 days
of paid time off available.)
If instead a contractor had a paid time off policy with the same
accrual practices but the contractor did choose to track and record
which leave employees used for the purposes described in Sec.
13.5(c)(1), application of the carryover requirement would in some
circumstances depend on how much leave each employee had so used. If an
employee used all 12 days in year 1 (in this case, regardless of
whether she used it all for vacation or used some for vacation and some
for the purposes described in Sec. 13.5(c)(1)), she would not carry
over any paid time off into year 2. If another employee used 7 days in
year 1 for vacation, the contractor would be required to permit her to
carry over her remaining 5 days into year 2 (and to use as much of
those 40 hours, in addition to as much of 56 additional hours accrued
in year 2, as she requested during year 2 for the purposes described in
Sec. 13.5(c)(1)). But if the employee used 7 days of paid time off
because she was sick, the contractor would not be required to permit
her to carry over any remaining paid time off into year 2. If instead
the employee had used 5 days because she was sick and 2 days for
vacation, the contractor would only be required to permit her to carry
over 2 of her remaining 5 days of paid time off into year 2 (and to use
as much of those 16 hours, in addition to as much of 56 additional
hours accrued in year 2, as she requested during year 2 for the
purposes described in Sec. 13.5(c)(1)). If a third employee used no
paid time off in year 1, the contractor would be required to allow her
to carry over 7 of her 12 days into year 2. (Consistent with Sec.
13.5(b)(3), the contractor would be permitted to limit an employee's
additional accrual in year 2 until she had less than 7 days of paid
time off available to use for the purposes described in Sec.
13.5(c)(1).)
If a contractor's paid time off policy provides leave at the
beginning of each year rather than allowing employees to accrue it over
time (as is permitted under Sec. 13.5(a)(3)), employees still need
only begin the subsequent year with as much leave as would have been
required under the Order and part 13. Under Sec. 13.5(a)(3), if a
contractor provides 56 hours of paid sick leave at the beginning of the
accrual year, an employee must receive 56 additional hours of paid sick
leave even if he has carried over some paid sick leave from the
previous accrual year. In practice, these requirements mean that an
employee of a contractor who has chosen the Sec. 13.5(a)(3) option
could begin accrual years after the first year with as much as 112
hours of paid sick leave. Accordingly, if a contractor provides
employees with 10 days of paid time off at the beginning of each year,
employees who use all of their leave (regardless of the purposes for
which the leave is used or whether the contractor tracks and records
such purposes) may begin subsequent years with only 10 days, but those
who have not used all of their leave must be permitted either to carry
over up to 4 days of unused paid time off (even if they have more) such
that they begin the year with up to 14 days (that is, 112 hours) of
leave or, if a contractor tracks and records leave used for the
purposes described in Sec. 13.5(c)(1), as much paid time off as is
unused and required to be available for such purposes (because the
employee has used less than any amount carried over plus up to 56 newly
accrued hours for such purposes). Alternatively, if an employee begins
new accrual years with 112 hours or more of paid time off, whether he
has carried over some of that time from the previous year or has
received new leave at or above that amount, the Department would
consider a contractor to have met its carryover obligation. In such
circumstances, a contractor that tracks and records the amount of paid
time off employees use for the purposes described in Sec. 13.5(c)(1)
must permit employees to use up to 112 hours of paid time off for such
purposes in compliance with the requirements of the Order and part 13
in accrual years after the first, consistent with Sec. 13.5(a)(3).
Paid time off policies used to satisfy the requirements of the
Order and part 13 pursuant to Sec. 13.5(f)(5) must also comply with
the requirement to reinstate leave for an employee rehired by the same
contractor within 12 months of a job separation. As with carryover,
however, only up to 56 hours of paid time off must be reinstated even
if employees have greater amounts of leave upon separation. The precise
amount will depend upon how much paid time off an employee has
remaining and, if a contractor tracks and records the amount of paid
time off used for the purposes described in
[[Page 67648]]
Sec. 13.5(c)(1), how much of that time the contractor must permit an
employee to use for such purposes based on the employee's prior use in
that accrual year. Because the Department has modified Sec. 13.5(b)(5)
to provide that if a contractor pays separating employees for unused
paid sick leave, no reinstatement of the leave is required, the same
relief from the obligation could apply to paid time off policies.
Under Sec. 13.5(f)(5), a contractor may only use its paid time off
policy to satisfy its obligations under the Order and part 13 if, when
an employee seeks to use or does use leave for the purposes described
in Sec. 13.5(c)(1) (all of which must be permissible uses of the paid
time off), the request and use of the leave comply with all of the
requirements of Sec. Sec. 13.5(c), (d), (e), Sec. 13.6, and Sec.
13.7. These requirements apply to all paid time off used for the
purposes described in Sec. 13.5(c)(1) regardless of whether the
contractor tracks and records such time.
The following examples illustrate how a contractor may treat paid
time off used for different purposes differently and the implications
of a contractor's choice to track and record the use of paid time off
for the purposes described in Sec. 13.5(c)(1).
When paid time off is used for a purpose described in Sec.
13.5(c)(1), employees must be permitted to use leave in increments of
no greater than 1 hour. A contractor may, however, require employees
using paid time off for other reasons (such as vacation) to use paid
time off in larger increments, such as half or full days. Therefore, if
an employee asked to come to work 2 hours late one day so he could
attend an event at his daughter's school, a contractor could require
the employee to take the entire day off; if the employee asked to come
to work 2 hours late because he needed to take his daughter to see her
pediatrician, however, the contractor would have to permit the employee
to use only 2 hours of paid time off.
If that contractor's paid time off policy provides 10 days of leave
each year, and the employee had already used 7 (8-hour) days of paid
time off that year to be absent from work because his daughter was
sick, the contractor's obligation to comply with the requirements of
Sec. Sec. 13.5(c), (d), (e), Sec. 13.6, and Sec. 13.7 with respect
to the employee's additional request to take his daughter to the
pediatrician would depend upon how the contractor managed its paid time
off policy. Specifically, if the contractor chose not to track and
record the reasons for which an employee had used paid time off, it
would be required to approve the employee's request to use only 2 hours
of paid time off. But if the contractor had kept a record noting that
the employee's previous requests to use paid time off were for a
purpose described in Sec. 13.5(c)(1) (in this case, caring for his
daughter when she was ill), it would have already fulfilled its
obligations under the Order and this part and would be free to require
that the employee use a full day of leave. Furthermore, if the employee
had already used all 10 days of paid time off, regardless of the reason
for his absences or whether the contractor tracked those reasons, the
contractor would be free to deny the employee's request for 2
additional hours of paid leave. As another example of how a contractor
can treat paid time off used for different purposes differently, a
contractor would be obligated not to make the use of paid time off
requested for a purpose described in Sec. 13.5(c)(1) contingent on
finding a replacement worker or fulfilling operational needs, although
it would be free to deny requests for vacation for those reasons.
The Department noted in the discussion of Sec. 13.5(f)(5) in the
NPRM that a paid time off policy used to satisfy a contractor's
obligations under the Order and part 13 may not set limits on the
amount of leave that may be used per year or at once; in the Final
Rule, this requirement in Sec. 13.5(c)(4) is clarified to make
explicit that use may be limited by the amount of paid sick leave an
employee has available. The Department similarly clarifies here that
compliance with this requirement in the context of a paid time off
policy involves either not limiting use per year, at least for the
purposes described in Sec. 13.5(c)(1), to an amount of leave less than
the total amount an employee has accrued under the contractor's policy,
or not limiting use per year to less than 56 hours of leave (or any
amount of leave carried over plus up to 56 hours of paid time off newly
accrued in the accrual year) for the purposes described in Sec.
13.5(c)(1), subject to the amount of paid time off an employee has
remaining, if the contractor tracks and records such use and chooses to
limit leave for such purposes.
For instance, if a contractor's policy provided employees with 120
hours of leave per year to use for any purpose and the contractor did
not track the purposes for which employees used leave, a contractor
could limit use per year to 120 hours. For example, the contractor
could permissibly deny an employee's request to use paid time off to
care for his frail grandmother after the employee had used all 120
hours in that year (for vacation or any other purpose). By contrast, a
contractor that does track and record the reasons an employee uses paid
time off could, for example, deny an employee's request to use paid
time off to meet with a counselor regarding domestic violence after an
employee (who did not carry over any leave from the previous accrual
year) had already used 56 hours of paid time off for that reason even
though the employee had additional, unused hours of paid time off that
year. That contractor could also deny that request if the employee had
already used all of her paid time off for the year, even if she had
only used 10 hours for purposes described in Sec. 13.5(c)(1) and the
rest for vacation.
As noted above, a contractor using its paid time off policy to
satisfy its obligations under the Order and part 13 must comply with
all of the requirements of Sec. 13.5(d) (which addresses employee
requests to use paid sick leave and contractors' responses to such
requests) with respect to leave used for any purpose described in Sec.
13.5(c)(1) (or to the amount of such leave as to which the contractor
must comply with the Order and part 13, if the contractor tracks and
records leave used for the purposes described in Sec. 13.5(c)(1)). For
example, consistent with that provision, a contractor may not require
employees to make requests for leave (at least when used for a purpose
described in Sec. 13.5(c)(1) and if the contractor is required to
comply with the Order and part 13 with respect to the leave) more than
7 days in advance of the need or as soon as is practicable if the need
for leave is not foreseeable. In addition, under a paid time off policy
used to fulfill a contractor's obligations under the Order and part 13
pursuant to Sec. 13.5(f)(5), a contractor's denial of a request to
take leave, at least when requested for the purposes required under
Sec. 13.5(c)(1) and if the contractor is required to comply with the
Order and part 13 with respect to the leave, must be explained in
writing that is in accordance with the permissible reasons for denial
under part 13.
Contractors have the option of complying with these and other
provisions of Sec. 13.5(c) and (d) (and (e), and Sec. Sec. 13.6 and
13.7) as to all paid time off or distinguishing between leave used for
the purposes described in Sec. 13.5(c)(1) and other purposes (such as
vacation time) even if they do not choose to track and record the
amount of time used for the purposes described in Sec. 13.5(c)(1). For
example, a contractor could approve any requests to use paid time off
made at least 7 days in advance
[[Page 67649]]
if foreseeable, or as soon as practicable if not foreseeable,
regardless of the reason for the absence, or a contractor could require
requests to use paid time off for vacation to be made 30 days in
advance but allow requests to use paid time off for illness (as well as
the other uses of paid sick leave described in Sec. 13.5(c)(1)) to be
made no more than 7 days in advance if foreseeable or as soon as
practicable if not foreseeable.
The rules regarding certification or documentation of the reason
for an absence of 3 or more full consecutive days in Sec. 13.5(e) are
also applicable to a paid time off policy used to satisfy the
requirements of the Order and part 13, at least with respect to paid
time off used for the purposes required by Sec. 13.5(c)(1). If the
contractor tracks and records the amount of leave used for the purposes
described in Sec. 13.5(c)(1), however, it would be required to comply
with Sec. 13.5(e) with respect to paid time off an employee uses for
the purposes described in Sec. 13.5(c)(1) only to the extent such
leave is within the amount of leave as to which the contractor must
comply with the Order and part 13 (that is, up to 56 hours in the first
accrual year and up to any amount carried over plus 56 hours in
subsequent accrual years). If a contractor's paid time off policy
allows the use of leave for a broad range of purposes, that contractor
might never require such certification or documentation, in which case
there would be no conflict with Sec. 13.5(e). Similarly, although the
recordkeeping requirements of part 13 apply to contractors who fulfill
their obligations under the Order with paid time off policies, to the
extent the contractor does not deny requests for leave or require
certification or documentation to justify the use of leave, no such
records will exist or, therefore, need to be maintained.
As noted in the NPRM, a contractor may only use its paid time off
policy to satisfy its obligations under the Order and part 13 if, at
least when an employee seeks to use or does use leave for the purposes
described in Sec. 13.5(c)(1) and if the contractor (that tracks and
records the amount of leave used for the purposes described in Sec.
13.5(c)(1)) is required to comply with the Order and part 13 with
respect to the leave, that leave is treated as protected by the
prohibitions on interference and discrimination as required by Sec.
13.6, meaning that, for example, the request for or use of leave could
not be used as a negative factor in any hiring or promotion decision
and could not be the basis for discipline, including by being counted
in a no fault attendance policy.
The Department notes that the option to track and record time as
described in this discussion is not reflected in the recordkeeping
requirements set forth in Sec. 13.25 because making and maintaining
documentation of the purposes for which employees use paid time off is
a choice rather than an obligation. If, however, a contractor wishes to
limit the amount of paid time off employees may use for the purposes
described in Sec. 13.5(c)(1))--and, more significantly, as to which it
must comply with the Order and part 13--the burden is on the contractor
to create and keep adequate documentation showing that it has in fact
allowed an employee to receive the required benefits such that it is
subsequently permitted to deny an employee of them. No particular form
of documentation is required; a contractor may develop any system for
tracking when paid time off is used for a purpose described in Sec.
13.5(c)(1) it chooses as long as the contractor has accurate records
(that could be reviewed during a WHD investigation) and employees are
properly notified of the amount of paid time off they have available
for such purposes.
The Department reiterates that a contractor has a choice between
amending an existing paid time off policy to operate as described here
or instead providing paid sick leave that is separate from its more
general leave policy. For example, if a contractor does not permit an
employee to use paid time off for the purposes described in Sec.
13.5(c)(1)(iv) related to domestic violence, sexual assault, or
stalking, its paid time off policy would not satisfy its obligations
under the Executive Order and part 13 as provided in Sec. 13.5(f)(5).
Accordingly, the contractor could choose to amend its paid time off
policy to permit leave for these additional purposes or could provide
paid sick leave pursuant to the Order and part 13 in addition to paid
time off. Similarly, if a contractor's policy allowed the contractor to
deny an employee's request for leave to be used for one of the purposes
described in Sec. 13.5(c)(1) based on operational needs, that policy
would not satisfy the contractor's obligations under the Executive
Order and part 13, and the contractor could either adjust its policy or
distinguish between paid sick leave (which it would provide in keeping
with the requirements of the Order and part 13) and other types of paid
time off it provides (which it could provide in any manner it wishes,
so long as it complies with any other applicable laws). And if a
contractor with a paid time off policy that provides more than 56 hours
of paid time off does not wish to comply with the requirements of the
Order and part 13 as described with respect to all of the leave its
policy allows or to track and record the amount of leave used for the
purposes described in Sec. 13.5(c)(1), it can instead provide paid
sick leave separately from paid time off.
Finally, as noted in the NPRM, although a contractor need not treat
vacation or other uses of leave under its paid time off policy
identically to the way it treats paid sick leave, the Department will
consider any aspects of a paid time off policy that create significant
barriers to an employee's using the time for the purposes described in
Sec. 13.5(c)(1) as interference with the employee's accrual or use
under the Order or part 13 in violation of Sec. 13.6(a) or, if
appropriate, as discrimination in violation of Sec. 13.6(b), meaning
that the paid time off policy would not satisfy the contractor's
obligations under the Order and part 13. For example, although a
contractor need not allow vacation time to be taken in 1-hour
increments, a contractor would not be in compliance with Sec. 13.6(a)
if it were to require employees to use all of the time provided in its
paid time off policy at once should the employee ask to take vacation,
such that any employee who took any vacation in an accrual year would
automatically have no paid time off remaining for the purposes
described in Sec. 13.5(c)(1). (This example does not imply that an
employee cannot choose to use all of her paid time off for vacation
such that she has no paid leave remaining in the event a need to be
absent from work for one of the reasons described in Sec. 13.5(c)(1)
arises; it signifies only that a contractor cannot deliberately make it
difficult to make a different choice.) Similarly, a contractor's paid
time off policy would not comply with Sec. 13.6(a) if the contractor
required employees to request leave for vacation 1 month in advance and
would not allow an employee who had scheduled such leave and who
became, or had a family member who became, unexpectedly ill to instead
use paid time off for that purpose (and cancel the other upcoming
leave, or take it as unpaid leave).
Section 13.6 Prohibited Acts
Proposed Sec. 13.6 described and prohibited acts that constitute
violations of the requirements of Executive Order 13706 and part 13.
Proposed Sec. 13.6(a)(1) prohibited a contractor from interfering
with an employee's accrual or use of paid sick leave as required by
Executive Order 13706 or part 13. Proposed Sec. 13.6(a)(2)
[[Page 67650]]
included a non-exclusive list of examples of interference. The first
example was miscalculating the amount of paid sick leave an employee
has accrued, such as if a contractor does not include all of an
employee's hours worked in calculating accrual. A second was denying or
unreasonably delaying a response to a proper request to use paid sick
leave, such as if a contractor denies a request to use paid sick leave
for an appointment with a clinical social worker because the contractor
mistakenly believes a clinical social worker is not a health care
provider, or if a contractor denies a request to use paid sick leave to
accompany the employee's sister to a court proceeding regarding
stalking because the contractor does not believe an employee can use
paid sick leave for a family member's legal proceeding related to
stalking, or if a contractor does not respond to an employee's timely
request for paid sick leave until after the need for leave has passed
(provided the request was made sufficiently in advance of the need).
In addition, the Department explained that as proposed,
interference included discouraging an employee from using paid sick
leave or reducing an employee's accrued paid sick leave by more than
the amount of such leave used. Transferring the employee to work on
non-covered contracts to prevent the accrual or use of paid sick leave,
including scheduling an employee's non-covered work to fall at the time
for which the employee has requested to use paid sick leave for the
purpose of avoiding approving the request (rather than for a lawful
reason, such as for a legitimate business purpose), would also
constitute interference. Finally, under the NPRM, interference also
included disclosing confidential information received in certification
or other documentation provided to verify the need to use paid sick
leave or making the use of paid sick leave contingent on the employee's
finding a replacement worker or the fulfillment of the contractor's
operational needs.
Proposed Sec. 13.6(b) was an anti-discrimination provision
implementing section 2(k) of Executive Order 13706. Proposed Sec.
13.6(b)(1) prohibited a contractor from discharging or in any other
manner discriminating against an employee for: (i) Using, or attempting
to use, paid sick leave as provided for under Executive Order 13706 and
part 13; (ii) filing any complaint, initiating any proceeding, or
otherwise asserting any right or claim under Executive Order 13706 and
part 13; (iii) cooperating in any investigation or testifying in any
proceeding under Executive Order 13706 and part 13; or (iv) informing
any other person about his or her rights under Executive Order 13706
and part 13.
Proposed Sec. 13.6(b)(2) addressed what constitutes
discrimination, a term the Department intended to be understood
broadly, by noting that discrimination included, but was not limited
to, a contractor's considering any of the activities described in Sec.
13.6(b)(1) as a negative factor in employment actions, such as hiring,
promotions, or disciplinary actions, or a contractor's counting paid
sick leave under a no fault attendance policy. See 29 CFR 825.220(c)
(analogous provision under FMLA regulations). Under this proposed
provision, a contractor could not, for example, reassign an employee to
fewer or less preferable shifts, to a less well paid position, or to a
non-covered contract because he used paid sick leave. The proposed
provision also prohibited a contractor, in deciding whether to hire an
employee to work on or in connection with a covered contract, to
consider as a factor that the contractor would be required to reinstate
the employee's unused paid sick leave from prior covered work pursuant
to Sec. 13.5(b)(4).
In the NPRM, the Department noted that this proposed provision
would serve the important purpose of ensuring effective enforcement of
the Executive Order, which will depend on complaints from employees,
and reiterated several interpretations of the provision it had
discussed in the Minimum Wage Executive Order rulemaking in connection
with a comparable anti-discrimination provision. 79 FR 60666-67. First,
consistent with the Supreme Court's interpretation of the FLSA's anti-
retaliation provision, Sec. 13.6(b) would protect employees who file
oral as well as written complaints. See Kasten v. Saint-Gobain
Performance Plastics Corp., 131 S. Ct. 1325, 1336 (2011). Furthermore,
as under the FLSA, the anti-discrimination provision under part 13
would protect employees who complain to the Department as well as those
who complain internally to their employers about alleged violations of
the Order or part 13. See, e.g., Minor v. Bostwick Laboratories, 669
F.3d 428, 438 (4th Cir. 2012); Hagan v. Echostar Satellite, LLC, 529
F.3d 617, 626 (5th Cir. 2008); Lambert v. Ackerley, 180 F.3d 997, 1008
(9th Cir. 1999) (en banc); Valerio v. Putnam Associates, 173 F.3d 35,
43 (1st Cir. 1999); EEOC v. Romeo Community Sch., 976 F.2d 985, 989
(6th Cir. 1992).
The Department further noted in the NPRM that the anti-
discrimination provision would apply in situations where there is no
current employment relationship between the parties; for example, it
would protect from retaliation by a prospective or former employer that
is a covered contractor. This position was consistent with the
Department's interpretation of the FLSA's anti-retaliation provision,
which it considers to extend to job applicants. As explained in the
Minimum Wage Executive Order rulemaking, however, the Department
recognizes that the U.S. Court of Appeals for the Fourth Circuit has
disagreed with its interpretation with respect to the coverage of job
applicants, see Dellinger v. Science Applications Int'l Corp., 649 F.3d
226 (4th Cir. 2011), and the Department therefore would not enforce its
interpretation on this issue in that circuit. See 79 FR 60667. To the
extent the application of the FLSA's anti-retaliation provision to job
applicants or internal complaints is definitively resolved through the
judicial process by the Supreme Court or otherwise, the Department
would interpret the anti-retaliation provision under the Executive
Order in accordance with such precedent. Id.
Commenters generally addressed the interference and discrimination
provisions together. Several commenters, including Demos, NELP, the
National Council of Jewish Women, NETWORK, Women Employed, and the
Diverse Elders Coalition, commented that these provisions were crucial
protections for workers, who would otherwise face punishment from
employers for using paid sick leave or be deterred from asking to use
paid sick leave in the first place. The NYC Department of Consumer
Affairs similarly commented that these provisions are fundamental
because without them, the paid sick leave benefit is merely illusory.
The Department adopts the provisions as proposed.
AGC commented that contractors needed to be able to address
employee abuse of paid sick leave without being in jeopardy of
violating these provisions. The Department recognizes that there will
be circumstances in which an employer becomes aware that an employee
has fraudulently used paid sick leave, such as by lying about being
sick or having a doctor's appointment. As in the FMLA context, an
employee who engages in fraud is not entitled to the benefits or
protections afforded by the Executive Order or part 13. See 29 CFR
825.216(d) (``An employee who fraudulently obtains FMLA leave from an
employer is not protected by FMLA's job restoration or maintenance of
health
[[Page 67651]]
benefits provisions.''). Accordingly, although a contractor may not
impose requirements on an employee's use of paid sick leave
specifically prohibited by the Order or part 13 (such as by requiring
certification of uses of paid sick leave that are shorter than 3 full
consecutive days) or otherwise discourage an employee's legitimate use
of paid sick leave (such as by disciplining an employee on the basis of
abuse of paid sick leave privileges that is suspected but not
verified), a contractor may investigate situations in which it believes
an employee has committed fraud. If a contractor determines, based on a
reasonable investigation of the circumstances, that an employee has
abused paid sick leave, it may respond appropriately, such as by
recouping (to the extent permitted by law) pay and benefits provided
when the employee used paid sick leave based on a request premised on
false information or by imposing discipline on the employee. In the
absence of verification of abuse, however, a contractor must permit an
employee to accrue and use paid sick leave according to the
requirements of part 13.
For example, assume an employee requests to use paid sick leave to
be absent every other Monday for several weeks, explaining that her
wife has doctors' appointments and needs her care, and the contractor
suspects she is actually taking long weekend trips to a vacation home.
The contractor can tell the employee that it suspects she is making
fraudulent requests for leave because it doubts her husband only needs
to see the doctor on days adjacent to weekends. In response, the
employee could provide additional information about her need to be
absent from work, such as by explaining that her wife has cancer and
receives radiation treatments every other Monday, or by voluntarily
providing certification (such as a note from the wife's oncologist). In
that case, the contractor would not have violated the provisions of
Sec. 13.6, and the contractor would be assured that the employee's
requests to use paid sick leave merited approval. As another example,
assume an employee requests to use paid sick leave because his son is
sick, but when his manager goes out to lunch during the work day, she
runs into the employee at a local bar without his son, and upon her
confronting the employee, he admits that he was not truthful about the
reason he wanted to take the day off. In that case, the contractor
would not have violated the provisions of Sec. 13.6, and the
contractor would know it need not have approved the employee's request
for paid sick leave. The contractor would be free to (among other
possible options) rescind such approval, decline to pay the employee
for that day, and count the day against the employee in its time and
attendance policy.
Finally, Vigilant asked that the Department state that if an
employee is absent from work despite not having enough paid sick leave
to cover the time, the contractor may count the additional time against
the employee pursuant to its attendance policy. The Department takes no
position in this rulemaking regarding what actions a contractor may
take with regard to time absent from work that is not--and should not
have been--designated as paid sick leave, though it notes that part 13
does not absolve contractors from complying with any other relevant law
regarding such actions and that whether a particular action constitutes
interference or discrimination under Sec. 13.6 (such as a contractor's
taking action against an employee who was absent for a full day after
the human resources department erroneously told him he had 8 hours of
paid sick leave although he actually had only 4) will depend on the
circumstances.
Proposed Sec. 13.6(c) provided that a contractor's failure to make
and maintain or to make available to the WHD records for inspection,
copying, and transcription as required by Sec. 13.25, or any other
failure to comply with the requirements of that provision, constituted
a violation of Executive Order 13706, part 13, and the underlying
contract. This proposed provision was derived from paragraph (g)(3) of
the contract clause included in the Minimum Wage Executive Order Final
Rule as well as analogous provisions in the SCA and DBA. 29 CFR
4.6(g)(3) (SCA); 29 CFR 5.5(a)(3)(iii) (DBA). The Department received
no comments specifically regarding this provision (though it notes that
other comments regarding recordkeeping and remedies for violations of
part 13 are discussed below), and adopts it as proposed.
Section 13.7 Waiver of Rights
Proposed Sec. 13.7 provided that employees cannot waive, nor may
contractors induce employees to waive, their rights under Executive
Order 13706 or part 13. The Department explained in the NPRM that it
had included a provision prohibiting the waiver of rights in the
regulations implementing the Minimum Wage Executive Order. 79 FR 60667.
The NPRM noted that, as the Department had explained in the Minimum
Wage Executive Order rulemaking, an employee's rights and remedies
under the FLSA, including payment of minimum wage and back wages,
cannot be waived or abridged by contract. 79 FR 60667 (citing Tony &
Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 302 (1985);
Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740
(1981); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 112-16 (1946);
Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945)). The Supreme
Court has explained that ``FLSA rights cannot be abridged by contract
or otherwise waived because this would `nullify the purposes' of the
statute and thwart the legislative policies it was designed to
effectuate,'' Barrentine, 450 U.S. at 740 (quoting Brooklyn Sav. Bank,
324 U.S. at 707), and that FLSA rights are not subject to waiver
because they serve an important public interest by protecting employers
against unfair methods of competition in the national economy, see Tony
& Susan Alamo Found., 471 U.S. at 302. Similarly, under the SCA
regulations, releases and waivers executed by employees for unpaid SCA
wages (and fringe benefits) are without legal effect. 29 CFR 4.187(d).
The Department believed it was appropriate to adopt this policy in the
NPRM because the interests underlying the issuance of Executive Order
13706 would be similarly thwarted by permitting workers to waive their
rights under the Order or part 13.
EEAC urged the Department to limit the waiver of rights provision
to prospective waivers, that is, to allow an employee to waive claims
to any remedy for an employer's past violations of the paid sick leave
requirements of the Order and part 13. EEAC asserted that the FLSA and
FMLA permit waiver of claims based on past employer conduct, and that
prohibiting such waiver under this Order would interfere with an
employee's ability to release or settle, rather than litigate,
employment-related matters.
The Department disagrees with the commenter's rationale. It is
correct that, although the FLSA and FMLA prohibit any prospective
waiver of rights, employees have some ability to settle or release
claims based on past employer conduct. See, e.g., 29 U.S.C. 218c(b)(2)
(``The rights and remedies [under the FLSA] may not be waived by any
agreement, policy, form, or condition of employment.''); 29 U.S.C.
216(c) (providing that an employee may agree, under the supervision of
the Secretary, to accept payment of compensation owed and, upon full
payment, waive rights to unpaid compensation); Cheeks v. Freeport
Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) (describing the
[[Page 67652]]
history of and limitations on waiver of rights under FLSA); 29 CFR
825.220(d) (``[E]mployees . . . cannot `trade off' the right to take
FMLA leave against some other benefit offered by the employer. This
does not prevent the settlement or release of FMLA claims by employees
based on past employer conduct.''). Those statutes, however, grant to
an employee a private right of action, 29 U.S.C. 216(b) (FLSA); 29 CFR
825.400(a)(2) (FMLA), whereas Executive Order 13706 does not enable
employees to pursue claims of violations of the Order on their own
behalf, but rather vests enforcement authority in the Secretary to
initiate an investigation of alleged violations, obtain compliance
where violations are discovered, and participate in enforcement
proceedings against a contractor where such violations are disputed.
See 80 FR 54699. Therefore, as a preliminary matter, waivers of
contractor liability, if they were permitted, would be limited: At
most, an employee could agree not to file a complaint with the WHD or
not to cooperate with an investigation or enforcement action the WHD
was pursuing.
Furthermore, such an agreement would deprive the Secretary of
important notice, testimony, and evidence needed to determine whether a
violation has occurred and would therefore limit the Secretary's
ability to obtain specific relief for employees whose rights have been
curtailed and to vindicate the general public interest in ensuring that
employees who work on or in connection with covered contracts have
access to paid sick leave. The SCA also does not create a private right
of action, instead vesting sole enforcement authority in the Secretary,
29 CFR 4.189, 4.191, and it prohibits all releases or waivers for
unpaid wages and fringe benefits due without distinguishing between
prospective waiver and waiver of claims based on past employer conduct,
29 CFR 4.187(d). For these reasons as well as those explained in the
Minimum Wage Executive Order rulemaking and reiterated in the NPRM,
permitting any waiver of rights under the Order would be inconsistent
with public policy and the Order's purposes.
Section 13.8 Multiemployer Plans or Other Funds, Plans, or Programs
Some commenters, including MCAA, AGC, and North American
Dismantling Corp., noted what they perceived to be the difficulty of
monitoring paid sick leave accrual and reinstatement in the
construction industry, in which employees may work for a contractor on
a short-term basis, sometimes more than once over the course of a year.
As explained in the discussion of employee coverage, a worker's
seasonal or part-time status does not affect a contractor's obligations
under the Order and part 13--including to track hours worked on with a
covered contract, which contractors with DBA-covered contracts will
already do, and to reinstate paid sick leave upon rehiring an employee
within 12 months of a separation from employment--although in practice,
the employee's accrual and use of paid sick leave will be limited by
his work schedule. The Department recognizes that in situations like
those described by these commenters, some employers resolve the issues
such transient employment can raise by providing benefits to employees
by contributing to multiemployer plans negotiated pursuant to CBAs. The
Building Trades specifically explained that in the construction
industry, multiemployer plans that provide benefits such as health
insurance, pension benefits, or vacation time are common. They
therefore asked that the Department allow contractors to create
multiemployer plans to jointly provide paid sick leave to comply with
the Order and part 13 as employees move between different contractors'
projects. AGC similarly requested that, if the Order and part 13 must
apply to laborers and mechanics, the Department permit contractors to
fulfill their paid sick leave obligations by making payments into a
multiemployer plan on behalf of covered workers, noting that some
existing multiemployer plans already provide for paid time off.
In response to these comments, the Department has added a new
provision, Sec. 13.8(a), to the Final Rule providing that a contractor
may fulfill its obligations under Executive Order 13706 and this part
jointly with other contractors--that is, as though all of the
contractors are a single contractor for purposes of Executive Order
13706 and part 13--through a multiemployer plan that provides paid sick
leave in compliance with the rules and requirements of Executive Order
13706 and this part. (The term multiemployer plan is defined in Sec.
13.2.) This new provision also provides that regardless of what
functions the plan performs, each contractor remains responsible for
any violation of the Order or part 13 that occurs during its employment
of the employee.
Under Sec. 13.8(a), if employees who work on or in connection with
covered contracts receive access to paid sick leave through a
multiemployer plan, the contractors that make contributions to that
plan on behalf of the employees satisfy their obligations under the
Order and part 13 as though they are all a single employer for purposes
of Executive Order 13706 and part 13. For example, assume an employee
is a member of a union that has a CBA with Contractors A and B that
provides that the employers will contribute to a multiemployer plan to
provide paid sick leave that complies with the requirements of the
Executive Order and part 13. If that employee works for Contractor A on
a DBA contract for a single pay period and accrues 2 hours of paid sick
leave, and she subsequently works for Contractor B on a different DBA
contract for several pay periods, the employee would begin the job for
Contractor B with 2 hours of paid sick leave available for use and
would accrue additional paid sick leave that would be added to those 2
hours for purposes of the accrual cap (of no less than 56 hours) for
which the CBA provides. In such a scenario, Contractor A and Contractor
B are separately responsible for complying with the Order and part 13
as to the employee's accrual and use of paid sick leave while working
for each respective employer; for example, if Contractor B denied an
employee's valid request to use paid sick leave the employee accrued
while working for Contractor A, Contractor B would have violated Sec.
13.6, and Contractor A would not be responsible for that violation. To
the extent the plan or any third party that administers the plan plays
a role in administering paid sick leave--for example, by tracking
accrual, notifying employees of the amounts of paid sick leave they
have accrued but not used, responding to employee requests to use paid
sick leave, or providing employees with the pay and benefits to which
they are entitled while using paid sick leave--the contractor for which
the employee is working at the time such actions are taken is
responsible for ensuring that the plan performs those functions in
compliance with the requirements of the Order and part 13.
AGC asked that the Department revise the proposed regulations to
allow contractors to fulfill their paid sick leave obligations by
contributing to a funded plan outside the multiemployer plan context,
whether a contractor creates such a plan pursuant to a CBA or not. The
Department did not intend any proposed regulatory provision or other
interpretation in the NPRM to prohibit a contractor from providing paid
sick leave by contributing to a plan, as long as the contractor's
employees have access to paid sick leave that meets all of the
requirements of the Order and part 13. For purposes
[[Page 67653]]
of clarity and completeness, the Department has added to the
regulations, as Sec. 13.8(b), a provision stating that nothing in part
13 prohibits a contractor from providing paid sick leave through a
fund, plan, or program. The new provision also notes that regardless of
the manner in which a contractor provides paid sick leave or what
functions any fund, plan, or program performs, the contractor remains
responsible for any violation of the Order or part 13 with respect to
any of its employees. In other words, a contractor would be free to
delegate to a fund, plan, or program--terms the Department intends to
have the meaning they do for purposes of the DBA, see 29 CFR 5.27
(``The phrase `fund, plan, or program' is merely intended to recognize
the various types of arrangements commonly used to provide fringe
benefits through employer contributions.'')--any or all of its
responsibilities under the Order and part 13. For example, the plan
might simply provide pay and benefits to an employee using paid sick
leave upon receiving instructions from a contractor to do so, or it
could also notify employees of their amounts of accrued paid sick leave
and even approve or deny requests to use the leave. The contractor
would remain ultimately responsible, however, for ensuring that its
obligations under the Order and part 13 are satisfied, and the
contractor would be liable for any violations of the Order and part 13
regardless of whether it has made proper contributions to the plan.
Finally, the Department notes that nothing in Sec. 13.8 (or any
other provision of part 13) has any effect on any claims procedure or
enforcement standards under ERISA that apply to plans that provide paid
sick leave.
Subpart B--Federal Government Requirements
Subpart B of part 13, which is largely modeled on subpart B of the
Minimum Wage Executive Order implementing regulations, 29 CFR 10.11-
10.12, establishes the requirements for the Federal Government to
implement and comply with Executive Order 13706. Section 13.11
addresses contracting agency requirements, and Sec. 13.12 explains the
requirements placed upon the Department of Labor.
Section 13.11 Contracting Agency Requirements
Proposed Sec. 13.11(a) implemented section 2(a) of Executive Order
13706 by directing that the contracting agency include the Executive
Order paid sick leave contract clause set forth in appendix A of part
13 in all covered contracts and solicitations for such contracts, as
described in Sec. 13.3, except for procurement contracts subject to
the FAR. Proposed Sec. 13.11(a) further provided that the required
contract clause directs, as a condition of payment, that all employees
performing work on or in connection with covered contracts be permitted
to accrue and use paid sick leave as required by Executive Order 13706
and part 13. It also provided that for procurement contracts subject to
the FAR, contracting agencies must use the contract clause set forth in
the FAR to implement part 13, and that the FAR clause will accomplish
the same purposes as the clause set forth in appendix A and be
consistent with the requirements set forth in part 13. The Department
explained in the NPRM that proposed Sec. 13.11(a) was effectively
identical to 29 CFR 10.11(a), the analogous provision in the Minimum
Wage Executive Order Final Rule.
PSC commented that contractors' compliance with the Order and part
13 should not be a condition of payment, arguing in part that this
requirement could expose contractors to liability under the False
Claims Act. As described in greater detail below in the discussion of
subpart C, the Department declines to alter this provision because
section 2(a) of the Order specifically requires a contract clause that
renders compliance with the Order a condition of payment. See 80 FR
54697. The Department therefore adopts Sec. 13.11(a) in the Final Rule
as proposed.
The Department reiterates that, as noted in the NPRM, inserting the
full contract clause in a covered contract is an effective and
practical means of ensuring that contractors receive notice of their
obligations under the Executive Order and part 13, and the Department
therefore prefers that covered contracts include the contract clause in
full. As discussed in the NPRM and below in the discussion of subpart
C, however, particular facts and circumstances may establish that the
contracting agency or contractor sufficiently apprised the prime or
lower-tier contractor that the Executive Order applied to the contract
despite the failure to include the contract clause in full in the
contract. See Nat'l Electro-Coatings, Inc. v. Brock, No. C86-2188, 1988
WL 125784 (N.D. Ohio July 13, 1988); In the Matter of Progressive
Design & Build, Inc., WAB Case No. 87-31, 1990 WL 484308 (WAB Feb. 21,
1990). In such circumstances, the contract clause may be deemed to have
been incorporated by reference in the covered contract. For example,
the full contract clause will be deemed to have been incorporated by
reference in a covered contract if the contract provides that
``Executive Order 13706--Establishing Paid Sick Leave for Federal
Contractors, and its implementing regulations, including the applicable
contract clause, are incorporated by reference into this contract as if
fully set forth in this contract'' and includes a citation to a Web
page that contains the contract clause in full, to the provision of the
Code of Federal Regulations containing the contract clause set forth at
appendix A to part 13, or to the provision of the FAR containing the
contract clause promulgated by the FARC to implement part 13.
Proposed Sec. 13.11(b) explained a contracting agency's
obligations in the event that it fails to include the contract clause
in a covered contract. Proposed Sec. 13.11(b) first provided that
where the Department of Labor or the contracting agency discovers or
determines, whether before or subsequent to a contract award, that the
contracting agency made an erroneous determination that Executive Order
13706 and part 13 did not apply to a particular contract and/or failed
to include the applicable contract clause in a contract to which the
Executive Order and part 13 apply, the contracting agency, on its own
initiative or within 15 calendar days of notification by an authorized
representative of the Department of Labor, would incorporate the clause
in the contract retroactive to commencement of performance under the
contract through the exercise of any and all authority that may be
needed (including, where necessary, its authority to negotiate or
amend, its authority to pay any necessary additional costs, and its
authority under any contract provision authorizing changes,
cancellation, and termination). The proposed language mirrored the
analogous provision in the Minimum Wage Executive Order's Final Rule,
see 29 CFR 10.11(b), which the Department developed based on similar
authority existing under the analogous SCA, see 29 CFR 4.5(c), and DBA,
see 29 CFR 1.6(f), implementing regulations.
Roffman Horvitz suggested that it would be unfair to impose a
retroactive obligation when a contracting officer or the Department
discovers after the contract has begun that the contract clause was
omitted. AGC requested that the Department require contracting agencies
to use the adjustments, or change-order, process to govern any cost
increases related to retroactively incorporating the contract clause.
PSC similarly requested that the Department expressly require a price
or cost adjustment when a contracting agency
[[Page 67654]]
fails to include the contract clause in a covered contract.
After carefully considering these comments, the Department adopts
Sec. 13.11(b) without change. The Order directs the Department to the
extent practicable to incorporate procedures and enforcement processes
that exist under the SCA, DBA, and Minimum Wage Executive Order. The
Department's approach incorporates the procedure used under the Minimum
Wage Executive Order (which the Department derived from similar SCA and
DBA procedures) when a contracting agency has failed to include the
contract clause and does not limit a contracting agency's authority to
pay any necessary additional costs. Furthermore, the Department
believes, as it did with respect to the Minimum Wage Executive Order
rulemaking, that this procedure will promote compliance with the Order
consistent with section 4(a) of the Order.
Proposed Sec. 13.11(c) provided that a contracting officer would,
upon his or her own action or upon written request of the
Administrator, withhold or cause to be withheld from the prime
contractor under the contract or any other Federal contract with the
same prime contractor, so much of the accrued payments or advances as
may be necessary to pay employees the full amount owed to compensate
for any violation of Executive Order 13706 or part 13. It further
provided that in the event of any such violation, the agency may, after
authorization or by direction of the Administrator and written
notification to the contractor, take action to cause suspension of any
further payment or advance of funds until such violations have ceased.
Such amounts would be based on the estimated monetary relief, including
any pay and/or benefits denied or lost by reason of the violation, or
other monetary losses sustained as a direct result of the violation as
described in Sec. 13.44.
The SCA, DBA, and Minimum Wage Executive Order's implementing
regulations provide for withholding to ensure the availability of
monies for payment to covered workers when a contractor or
subcontractor has failed to comply with its obligations to pay required
wages (including fringe benefits where applicable). 29 CFR 4.6(i)
(SCA); 29 CFR 5.5(a)(2) (DBA); 29 CFR 10.11(c) (Executive Order 13658).
The Department reasoned that withholding likewise is an appropriate
remedy under this Executive Order because the Order directs the
Department to adopt enforcement processes from the SCA, DBA, and
Minimum Wage Executive Order to the extent practicable and to exercise
authority to obtain compliance with the Order. 80 FR 54699. Consistent
with withholding procedures under the SCA and DBA, which were also
adopted in the Minimum Wage Executive Order rulemaking, proposed Sec.
13.11(c) would allow the contracting agency and the Department to
withhold or cause to be withheld funds from the prime contractor not
only under the contract on which violations of the paid sick leave
requirements of Executive Order 13706 and part 13 occurred, but also
under any other contract that the prime contractor has entered into
with the Federal Government. 29 CFR 4.6(i) (SCA); 29 CFR 5.5(a)(2)
(DBA); 29 CFR 10.11(c) (Executive Order 13658).
Proposed Sec. 13.11(c) also provided that any failure to comply
with the requirements of Executive Order 13706 or part 13 could be
grounds for termination of the right to proceed with the contract work.
Under the proposed rule, in such event, the contracting agency could
enter into other contracts or arrangements for completion of the work,
charging the contractor in default with any additional cost. This
language was essentially identical to language included in the
analogous provision in the Minimum Wage Executive Order rulemaking. See
79 FR 60724 (codified at 29 CFR 10.11(c)).
AGC requested that contracting officers not have authority to
withhold payments to a prime contractor, asserting that contracting
officers lack a standard upon which to determine that an alleged
violation rises to the level of an actual or actionable violation and
that it would accordingly be suitable to compel contracting officers to
forward all allegations of noncompliance to the Department for
investigation. As the Department noted above, the proposed provision,
consistent with the Order's directive to incorporate procedures and
enforcement processes under the SCA, DBA and Minimum Wage Executive
Order, mirrors regulations under the SCA, DBA, and Minimum Wage
Executive Order that authorize contracting officers to withhold monies
from accrued payments or advances as may be considered necessary to pay
employees the full amount owed to compensate for any violation of the
DBA, SCA, or Minimum Wage Executive Order. In addition, the Department
believes that authorizing contracting officers to withhold in the
circumstances contemplated by Sec. 13.11(c) will help the Department
to obtain compliance with the Order's requirements consistent with
section 4(a) of the Order. Although the Department anticipates that
contracting officers typically will effectuate withholding in response
to written requests from the Administrator, the Department also
believes that contracting officers should have the authority (as they
do under the SCA, DBA and Minimum Wage Executive Order) to withhold on
their own action when such withholding may be necessary to pay
employees the full amount owed to compensate for any violation of
Executive Order 13706 or part 13.
AGC also suggested that the Department prohibit contracting
agencies from canceling or terminating a contract that fails to include
the paid sick leave contract clause. The Department wishes to reaffirm
that the authority of a contracting agency to cancel or terminate a
contract is conditioned on a contractor's failure to comply with the
Order or part 13. The Department modeled this authority on a
contracting agency's authority to cancel a contract under the Minimum
Wage Executive Order, see 29 CFR 10.11(c), which itself reflected a
contracting agency's power under the SCA, see 29 CFR 4.6(i), and DBA,
see 29 CFR 5.5(a)(7). Because the Order instructs the Department to
incorporate enforcement processes under the Minimum Wage Executive
Order, SCA, and DBA to the extent practicable, and because the
Department believes the possibility of contract termination by a
contracting agency due to a contractor's failure to comply with the
Order will advance the Department's efforts to obtain compliance with
the Order, the Department declines to adopt the commenter's suggestion.
For all of the reasons described, the Department adopts Sec. 13.11(c)
as proposed, except that it has corrected an inadvertent omission: The
second sentence now provides that an agency may act to suspend not just
a payment or advance, but also a guarantee of funds consistent with the
DBA regulations at 29 CFR 5.5(a)(2) (as well as paragraph (d) of the
contract clause in appendix A as proposed and adopted).
Proposed Sec. 13.11(d) described a contracting agency's
responsibility to suspend further payment or advance of funds to a
contractor that fails to make available for inspection, copying, and
transcription any of the records identified in Sec. 13.25. The
proposal required contracting agencies to take action to suspend
payment or advance of funds under these circumstances upon their own
action, or upon the direction of the Administrator and notification of
the contractor. Proposed Sec. 13.11(d) was derived from paragraph
(g)(3) of the Minimum Wage Executive
[[Page 67655]]
Order contract clause, 79 FR 60731, and was consistent with the
analogous provisions of the SCA and DBA regulations, 29 CFR 4.6(g)(3)
(SCA); 29 CFR 5.5(a)(3)(iii) (DBA). The Department did not receive any
comments on proposed Sec. 13.11(d) and therefore adopts the provision
as proposed except that it corrects the same omission of a reference to
suspending a guarantee of funds described with respect to Sec.
13.11(c).
Proposed Sec. 13.11(e) described a contracting agency's
responsibility to forward to the WHD any complaint alleging a
contractor's non-compliance with Executive Order 13706 or part 13, as
well as any information related to the complaint. Although the
Department proposed in Sec. 13.41 that complaints be filed with the
WHD rather than with contracting agencies, the Department recognized
that some employees or other interested parties nonetheless could file
formal or informal complaints concerning alleged violations of the
Executive Order or part 13 with contracting agencies. Proposed Sec.
13.11(e)(1) therefore specifically required the contracting agency to
transmit the complaint-related information identified in proposed Sec.
13.11(e)(2) to the WHD's Office of Government Contracts Enforcement
within 14 calendar days of receipt of a complaint alleging a violation
of the Executive Order or part 13, or within 14 calendar days of being
contacted by the WHD regarding any such complaint.
Proposed Sec. 13.11(e)(2) described the contents of any
transmission under proposed Sec. 13.11(e)(1). Specifically, it
provided that the contracting agency would forward to the Office of
Government Contracts Enforcement any: (i) Complaint of contractor
noncompliance with Executive Order 13706 or part 13; (ii) available
statements by the worker, contractor, or any other person regarding the
alleged violation; (iii) evidence that the Executive Order paid sick
leave contract clause was included in the contract; (iv) information
concerning known settlement negotiations between the parties, if
applicable; and (v) any other relevant facts known to the contracting
agency or other information requested by the WHD.
Proposed Sec. 13.11(e) was nearly identical to 29 CFR 10.11(d) as
promulgated by the Minimum Wage Executive Order Final Rule, which was
derived from analogous provisions in the Department's regulations
implementing the Nondisplacement Executive Order. 79 FR 60669 (citing
29 CFR 9.11(d)). In the NPRM, the Department stated that proposed Sec.
13.11(e), which included an obligation to send such complaint-related
information to the WHD even absent a specific request (e.g., when a
complaint was filed with a contracting agency rather than with the
WHD), was appropriate because prompt receipt of such information from
the relevant contracting agency would allow the Department to fulfill
its charge under the Order to obtain compliance with the Order. 80 FR
54699. The proposed requirement was consistent with the requirements in
the Minimum Wage Executive Order rulemaking. The Department did not
receive any comments on proposed Sec. 13.11(e) and therefore
implements the provision as proposed.
Proposed Sec. 13.11(f) stated that a contracting officer would
provide to a successor contractor any predecessor contractor's
certified list, provided to the contracting officer pursuant to
proposed Sec. 13.26, of the amounts of unused paid sick leave that
employees have accrued. The Department intended this requirement to
facilitate compliance by successor contractors with Sec. 13.5(b)(4),
which required that paid sick leave be reinstated for employees rehired
by a successor contractor within 12 months of the job separation from
the predecessor contractor. Because that provision does not appear in
the Final Rule, as explained above, the Department has also removed
this provision from the Final Rule.
Section 13.12 Department of Labor Requirements
Proposed Sec. 13.12 set forth the Department's obligations under
the Executive Order. Proposed Sec. 13.12(a) addressed notice-related
requirements. Specifically, proposed Sec. 13.12(a)(1) stated that the
Administrator would publish and maintain on Wage Determinations OnLine
(WDOL), http://www.wdol.gov, or any successor Web site, a notice that
Executive Order 13706 creates a requirement to allow employees
performing work on or in connection with contracts covered by Executive
Order 13706 and part 13 to accrue and use paid sick leave, as well as
an indication of where to find more complete information about that
requirement. Proposed Sec. 13.12(a)(2) provided that the Administrator
would also publish a notice on all wage determinations issued under the
DBA and SCA that Executive Order 13706 creates a requirement to allow
employees performing work on or in connection with contracts covered by
Executive Order 13706 and part 13 to accrue and use paid sick leave, as
well as an indication of where to find more complete information about
that requirement.
Many commenters, including the NYC Department of Consumer Affairs
and the Center for the Study of Social Policy, supported the
Department's proposal to create a notice poster. The Department adopts
Sec. 13.12(a) as proposed and will publish the notice poster on the
WHD Web site.
Proposed Sec. 13.12(b), which was modeled on 29 CFR 10.12(d) as
promulgated by the Minimum Wage Executive Order rulemaking, addressed
the Department's obligation to notify a contractor of a request to the
contracting agency for the withholding of funds or a request for the
suspension of payment or advance of funds. As explained above, Sec.
13.11(c) authorizes the Administrator to direct that payments due on
the covered contract or any other contract between the contractor and
the Federal Government be withheld as may be considered necessary to
provide for monetary relief for violations of Executive Order 13706 or
part 13, and Sec. 13.11(d) authorizes the Administrator to direct that
the contracting agency suspend payment, advance, or guarantee of funds.
If the Administrator made the requests contemplated by Sec. 13.11(c)
or (d), proposed Sec. 13.12(b) would require the Administrator and/or
the contracting agency to notify the affected prime contractor of the
Administrator's withholding request to the contracting agency. Although
it is only necessary that one party--either the Administrator or the
contracting agency--provide the notice, the other can choose in its
discretion to provide notice as well. The Department did not receive
any comments addressing proposed Sec. 13.12(b) and implements the
provision as proposed, although it has inserted a reference to a
guarantee of funds for the reasons explained in the discussion of Sec.
13.11(c).
Subpart C--Contractor Requirements
Subpart C of part 13 describes the requirements with which
contractors must comply under Executive Order 13706 and part 13. It
sets forth the obligations to include the applicable paid sick leave
contract clause in subcontracts and lower-tier contracts as well as to
comply with the contract clause. It also sets forth contractor
requirements pertaining to deductions, kickbacks, recordkeeping,
notice, and timing of pay.
Section 13.21 Contract Clause
Proposed Sec. 13.21(a), which implemented section 2(a) of the
Order and was adopted from 29 CFR 10.21 as promulgated by the Minimum
Wage
[[Page 67656]]
Executive Order Final Rule, required the contractor, as a condition of
payment, to abide by the terms of the applicable paid sick leave
contract clause referred to in Sec. 13.11(a). The applicable contract
clause would contain the requirements with which the contractor must
comply on the covered contract. PSC requested that the Department
remove the language in proposed Sec. 13.21(a) rendering compliance
with the Order and part 13 a ``condition of payment.'' PSC asserted
this language exposes contractors to potential False Claims Act
liability and is unnecessary because the Department proposed sufficient
remedial options in Sec. 13.44. However, section 2(a) of the Executive
Order specifically requires a contract clause that renders compliance
with the Order a condition of payment. 80 FR 54697. Thus, the
Department declines to accept PSC's suggestion and adopts Sec. 13.21
in the Final Rule as proposed.
Proposed Sec. 13.21(b) required that contractors include the
applicable contract clause in any covered subcontracts and, as a
condition of payment, that subcontractors include the clause in all
lower-tier subcontracts. Under the proposal, the prime contractor and
upper-tier contractors would be responsible for compliance by any
subcontractor or lower-tier subcontractor with Executive Order 13706
and part 13, regardless of whether the contract clause was included in
the subcontract. This responsibility on the part of prime and upper-
tier contractors for subcontractor compliance, which is commonly
referred to as ``flow-down'' liability, paralleled that of the SCA,
DBA, and Minimum Wage Executive Order. See 29 CFR 4.114(b) (SCA); 29
CFR 5.5(a)(6) (DBA); 29 CFR 10.21(b) (Executive Order 13658).
EEAC and Vigilant requested that covered contractors be permitted
to incorporate the contract clause by reference into covered
subcontracts. As the Department noted with respect to insertion of the
contract clause in the discussion of Sec. 13.11(a), the Department
prefers that contractors include the contract clause in full in covered
contracts, including covered subcontracts. However, there may be facts
and circumstances establishing that the contractor sufficiently
apprised the lower-tier subcontractor that the Order applies to the
subcontract despite the contractor's failure to include the contract
clause in full in the covered subcontract. The Department notes, for
example, that the full contract clause will be deemed to have been
incorporated by reference in a covered subcontract if the subcontract
provides that ``Executive Order 13706--Establishing Paid Sick Leave for
Federal Contractors, and its implementing regulations, including the
applicable contract clause, are incorporated by reference into this
contract as if fully set forth in this contract'' and includes a
citation to a Web page that contains the contract clause in full, to
the provision of the Code of Federal Regulations containing the
contract clause set forth at appendix A to part 13, or to the provision
of the FAR containing the contract clause promulgated by the FARC to
implement part 13.
AGC requested that the Department delete the final sentence of
proposed Sec. 13.21(b), which imposes flow-down liability on upper-
tier contractors. AGC specifically asserts that it is more difficult
for upper-tier contractors to monitor lower-tier contractors'
compliance with the Order's requirements than it is to monitor such
contractors' compliance with DBA requirements. ABC similarly contended
it will be difficult for upper-tier contractors to monitor lower-tier
contractors' compliance with the Order, noting, as did AGC, that
employees working for lower-tier contractors with which upper-tier
contractors subcontract may have accrued paid sick leave on other
covered contracts. The Chamber/IFA requested that the Department detail
the types of activities that upper-tier contractors would be expected
to conduct in order to ensure compliance by subcontractors. NECA
contended the cost of lower-tier compliance oversight will increase
project costs and that the Department should accordingly consider
alternative enforcement mechanisms. Finally, Vigilant questioned the
Department's authority to impose flow-down liability, suggesting that
an upper-tier contractor's sole responsibility should be to incorporate
the contract clause in its subcontract.
After careful consideration of the comments received, the
Department has decided to adopt Sec. 13.21(b) as proposed. In response
to the comments submitted by the Chamber/IFA and NECA, as well as
comments from AGC and ABC asserting that upper-tier contractors'
oversight of lower-tier contractors here may present challenges not
present under the DBA and SCA, the Department notes that covered
contractors are required to insert the applicable contract clause in
subcontracts in order to inform covered subcontractors of the
requirements with which they must comply, and that covered contractors
have the latitude to implement additional measures to promote
compliance by subcontractors, including emphasizing to subcontractors
that the Executive Order and part 13 apply to employees performing work
on or in connection with covered subcontracts and directing covered
subcontractors to the portions of this Final Rule and related guidance
materials that explain the rule's application to such employees. The
Department further notes that upper-tier contractors can, and the
Department understands often do, indemnify themselves against
violations committed by lower-tier contractors. With respect to
Vigilant's comment, both the SCA and DBA, to which the Order directs
the Department to look in adopting remedies and enforcement processes,
have long permitted the Department to hold a prime contractor
responsible for compliance by any lower-tier contractor, see 29 CFR
4.114(b) (SCA); 29 CFR 5.5(a)(6) (DBA), and the Minimum Wage Executive
Order's implementing regulations make the prime and upper-tier
contractors responsible for compliance by any lower-tier contractor,
see 29 CFR 10.21(b). Removal of this obligation, as AGC has requested,
could diminish the level of care contractors exercise in selecting
subcontractors on covered contracts and reduce contractors' monitoring
of the performance of subcontractors--two ``vital functions'' served by
the flow-down responsibility. In the Matter of Bongiovanni, WAB Case
No. 91-08, 1991 WL 494751 (WAB April 19, 1991). Removal of this
obligation could additionally hamper the Department's enforcement
efforts under section 4(a) of the Order because a contractor's
responsibility for the compliance of its lower-tier subcontractors
enhances the Department's ability to obtain compliance with the
Executive Order. For all these reasons, the Department declines to
grant the request to remove the flow-down liability obligation.
Section 13.22 Paid Sick Leave
Proposed Sec. 13.22 required contractors to allow all employees
performing work on or in connection with a covered contract to accrue
and use paid sick leave as required by the Executive Order and part 13.
The Department received many comments related to contractors' paid sick
leave obligations, which are addressed in subpart A of the preamble,
but no comments specifically addressing Sec. 13.22. This provision is
therefore adopted as proposed.
Section 13.23 Deductions
Proposed Sec. 13.23 stated that contractors may only make
deductions from the pay and benefits of an employee who is using paid
sick leave under the limited circumstances set
[[Page 67657]]
forth in the proposed provision. The reference to ``pay and benefits''
in proposed Sec. 13.23 had the same meaning as the reference to pay
and benefits in Sec. 13.5(c)(3), discussed above.
Proposed Sec. 13.23 permitted deductions required by Federal,
State, or local law, including Federal or State withholding of income
taxes. See 29 CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR
5.5(a)(1) (DBA); 29 CFR 10.23(a) (Executive Order 13658). This proposed
provision also permitted deductions for payments made to third parties
pursuant to court orders. See 29 CFR 531.39 (FLSA); 29 CFR 4.168(a)
(SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(b) (Executive Order 13658).
Permissible deductions made pursuant to a court order could include
such deductions as those made for child support. The proposed section
also permitted deductions directed by a voluntary assignment of the
employee or his or her authorized representative. See 29 CFR 531.40
(FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(c)
(Executive Order 13658). Deductions directed by a voluntary assignment
included, but were not limited to, deductions for the purchase of U.S.
savings bonds, donations to charitable organizations, and the payment
of union dues. Deductions made for voluntary assignments were required
to be made for the employee's account and benefit pursuant to the
request of the employee or his or her authorized representative. See 29
CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA).
Finally, the Department proposed to permit deductions made for the
reasonable cost or fair value of board, lodging, and other facilities.
See 29 CFR part 531 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1)
(DBA); 29 CFR 10.23(d) (Executive Order 13658). Deductions made for the
reasonable cost or fair value of board, lodging and other facilities
were required to comply with the regulations in 29 CFR part 531. In the
proposal, the Department noted that a contractor could take credit for
the reasonable cost or fair value of board, lodging, or other
facilities against an employee's wages, rather than taking a deduction
for the reasonable cost or fair value of these items. See 29 CFR part
531. The Department did not receive comments asking for modifications
to proposed Sec. 13.23. The Department is therefore adopting the
language proposed, but it is also adding as Sec. 13.23(e) that
deductions are also permissible, to the extent permitted by law, for
the purpose of recouping pay and benefits provided for paid sick leave
as to which the contractor retroactively denied the employee's request
pursuant to Sec. 13.5(e)(3)(iii) or because the contractor approved
the use of the paid sick leave based on a fraudulent request. This
addition is consistent with the discussion of Sec. 13.5(e)(3)(iii) and
of comments regarding employee abuse of paid sick leave benefits.
Section 13.24 Anti-Kickback
Proposed Sec. 13.24 required that all paid sick leave used by
employees performing work on or in connection with covered contracts be
paid free and clear and without subsequent deduction (unless as set
forth in Sec. 13.23), rebate, or kickback on any account. It further
prohibited kickbacks directly or indirectly to the contractor or to
another person for the benefit of the contractor for the whole or part
of the paid sick leave. The proposal was derived from the Executive
Order 13658 Final Rule at 29 CFR 10.27; it reflected the Department's
intent to ensure that employees actually receive the full pay and
benefits to which they are entitled under the Executive Order and part
13. The Department received no comments on this provision and adopts it
as proposed.
Section 13.25 Records To Be Kept by Contractors
Proposed Sec. 13.25 explained the recordkeeping and related
requirements for contractors. The obligations set forth in proposed
Sec. 13.25 were derived from the FLSA, SCA, DBA, FMLA and Executive
Order 13658. See 29 CFR part 516 (FLSA); 29 CFR 4.6(g) (SCA); 29 CFR
5.5(a)(3) (DBA); 29 CFR 825.500(c) (FMLA); 29 CFR 10.26 (Executive
Order 13658). Proposed Sec. 13.25(a) required contractors and
subcontractors to make and maintain during the course of the covered
contract, and preserve for no less than 3 years thereafter, records
containing the information enumerated in proposed Sec. 13.25(a)(1)-
(15). It also required contractors to make such records available to
the WHD for inspection, copying, and transcription.
Proposed Sec. 13.25(a)(1)-(6) required contractors to make and
maintain for each employee: Name, address, and Social Security number;
the employee's occupation(s) or classification(s); the rate or rates of
wages paid; the number of daily and weekly hours worked; any deductions
made; and the total wages paid each pay period. Contractor obligations
to maintain the categories of records set forth in proposed Sec.
13.25(a)(1)-(6) were derived from and are consistent across the FLSA,
SCA, and DBA (with the exception of the requirement to preserve records
for no less than 3 years after the contract expires, which applies
under the DBA and SCA but not the FLSA). An exception to the
requirement in proposed Sec. 13.25(a)(4) to keep records of an
employee's hours worked was provided in proposed Sec. 13.25(c), as
described below. Therefore, in conjunction with Sec. 13.25(c), these
recordkeeping requirements imposed almost no new burdens on
contractors.
Proposed Sec. 13.25(a)(7) required contractors to make and
maintain copies of notifications to employees of the amount of paid
sick leave the employees accrued as required under Sec. 13.5(a)(2).
Proposed Sec. 13.25(a)(8) required contractors to maintain copies of
employees' requests to use paid sick leave, if in writing, or, if not
in writing, any other records of employees' requests.
Proposed Sec. 13.25(a)(9) required contractors to make and
maintain records of the dates and amounts of paid sick leave used by
employees and further specified that unless a contractor's paid time
off policy satisfies the requirements of Executive Order 13706 and part
13 as described in Sec. 13.5(f)(5), contractors must designate the
leave in their records as paid sick leave pursuant to Executive Order
13706. Proposed Sec. 13.25(a)(10) required contractors to make and
maintain copies of any written denials of employees' requests to use
paid sick leave, including explanations for such denials, as required
under Sec. 13.5(d)(3). Proposed Sec. 13.25(a)(11) required
contractors to make and maintain records relating to the certification
and documentation a contractor could require an employee to provide
under Sec. 13.5(e), including copies of any certification or
documentation provided by an employee. Proposed Sec. 13.25(a)(12)
required contractors to make and maintain any other records showing any
tracking of or calculations related to an employee's accrual and/or use
of paid sick leave.
Proposed Sec. 13.25(a)(13) required contractors to make and
maintain copies of any certified list of employees' accrued, unused
paid sick leave provided to a contracting officer in compliance with
proposed Sec. 13.26. Proposed Sec. 13.25(a)(14) required contractors
to maintain any certified list of employees' accrued, unused paid sick
leave received from the contracting agency in compliance with proposed
Sec. 13.11(f). Finally, proposed Sec. 13.25(a)(15) required
contractors to maintain a copy of the relevant covered contract. The
Department explained that each of the recordkeeping obligations
[[Page 67658]]
set forth in proposed Sec. 13.25(a)(1)-(15) were necessary and
appropriate for the enforcement of Executive Order 13706 and part 13
because they require the maintenance and preservation of records
necessary to investigate potential violations of and obtain compliance
with the Order, consistent with sections 3(a) and 4(a) of the Order.
The Chamber/IFA, the American Benefits Council, and Seyfarth Shaw
asserted that the requirement to preserve records for 3 years after
contract completion was unduly burdensome. The Department has carefully
reviewed the commenters' concerns; however, the Department declines to
reduce the time period required for preserving records in this Final
Rule. Section 3(a) of the Executive Order specifically authorizes the
Secretary to issue regulations requiring contractors to make, keep, and
preserve such employee records as the Secretary deems necessary and
appropriate for the enforcement of either the Order's provisions or the
regulations issued by the Department. Section 4(a) of the Executive
Order further authorizes the Secretary to investigate possible
violations of and obtain compliance with the Order, and instructs the
Department, to the extent practicable, to adopt procedures and
enforcement processes consistent with the FLSA, SCA, DBA, FMLA, VAWA,
and Minimum Wage Executive Order. The obligation to preserve records
for 3 years after contract completion mirrors the recordkeeping
requirements under the SCA and DBA, see 29 CFR 4.6(g) (SCA); 29 CFR
5.5(a)(3) (DBA), that the Department has previously determined would
assist in investigating possible violations of and obtaining compliance
with those statutes' provisions. Thus, the requirements in proposed
Sec. 13.25(a) are not undue; rather, consistent with sections 3(a) and
4(a) of the Order, the Secretary has determined that maintenance and
preservation of the records set forth in proposed Sec. 13.25(a) for 3
years after contract completion is necessary and appropriate to ensure
the Department can effectively investigate potential violations of and
obtain compliance with the Order.
PSC requested that the Department ``streamline'' the recordkeeping
requirements contained in Sec. 13.25(a)(7)-(12) because, although
those provisions reflect FMLA requirements, they are more burdensome
here because the instances of paid sick leave will outnumber those
under the FMLA. The ERISA Industry Committee similarly requested that
the Department remove or otherwise decrease a contractor's
recordkeeping requirements related to required notifications of the
amount of paid sick leave employees have accrued. Consistent with these
requests and as explained in the discussion of Sec. 13.5(a)(2), the
Department has reduced the frequency with which a contractor must
notify employees of the leave they have accrued under the Order, which
will reduce the required recordkeeping under Sec. 13.25(a)(7). In
addition, the Department has clarified elsewhere in this Final Rule
that contractors may create and preserve documents electronically. With
respect to the other recordkeeping requirements contained in Sec.
13.25(a)(7)-(12), the Department understands that these requirements
might result in a greater volume of recordkeeping than under the FMLA
because there are likely to be more instances of leave under the Order
than contractors experience under the FMLA. However, as mentioned
above, the records the Department is requiring covered contractors to
maintain under Sec. 13.25(a)(7)-(12) are necessary to ensure the
Department can fulfill its enforcement mandate under the Order.
The HR Policy Association requested that covered contractors be
permitted to preserve the required records electronically. Similarly,
the Chamber/IFA suggested that contractors be permitted to send
required notifications to employees electronically to avoid the
accumulation of paper. The ERISA Industry Committee contended that the
voluminous records covered contractors would need to create to comply
with the recordkeeping requirements would cause an administrative
burden. In response to these comments, the Department clarifies that,
as proposed, Sec. 13.25(a) allowed a covered contractor to make and
maintain the required records electronically provided that the
reproductions of the electronic records were clear, identifiable,
otherwise satisfy the specific requirements of Sec. 13.25(a)(1)-(15),
and were made available upon request. The Department additionally
notes, however, that regardless of how a contractor maintains the
required records, a contractor may only send information required by
the Order and part 13 to employees electronically if the contractor
customarily corresponds with or makes information available to its
employees by electronic means. The Department expects that the right of
contractors to make and maintain records electronically in the manner
described above, which is generally consistent with FLSA and FMLA
recordkeeping requirements under 29 CFR 516.1(a) and 825.500(b),
respectively, should significantly reduce contractors' asserted
recordkeeping burdens under the Order and implementing regulations.
The Chamber/IFA, the ERISA Industry Committee, and the HR Policy
Association also asserted that the requirement in proposed Sec.
13.25(a)(9) to designate leave used in records as paid sick leave
pursuant to the Order will cause confusion because the leave might also
satisfy overlapping Federal, State, or local leave requirements. The
Department agrees that there may be circumstances when leave taken by
an employee under the Order also satisfies a contractor's obligations
under another Federal, State, or local law. However, the Department
does not agree that requiring such leave to be designated consistent
with proposed Sec. 13.25(a)(9) will cause undue confusion. First, the
language in the proposed rule does not preclude covered contractors
from also designating the leave in its records as compliant with
another legal or regulatory obligation; therefore, contractors may
additionally designate the leave as compliant with the overlapping
legal requirements. Second, although the Department is not requiring
contractors to disclose records made under proposed Sec. 13.25(a)(9)
to employees, it is possible that employees will receive documents,
such as pay stubs, that identify leave used by employees as paid sick
leave pursuant to the Order. Rather than causing confusion, however,
the Department believes that such disclosures, to the extent they
occur, will help employees stay apprised of how much paid sick leave
they have used.
ABC contended that the proposed rule does not address the new
recordkeeping requirements it is imposing with respect to exempt
employees, apparently referring to the Order's coverage of employees
who qualify for an exemption from the FLSA's minimum wage and overtime
provisions. Under Sec. 13.25(c) (adopted as proposed, as explained
below), however, a contractor is excused from maintaining records of
employees' number of daily and weekly hours worked as otherwise
required under Sec. 13.25(a)(4) if the SCA, DBA, or FLSA do not
require the contractor to keep records of the employees' hours worked
and the contractor elected to use the assumption, permitted by Sec.
13.5(a)(1)(iii), that the employee works 40 hours on or in connection
with covered contracts in each workweek. Thus, the Department has not
only addressed the new recordkeeping requirement with respect to exempt
employees, it has also provided contractors an opportunity to
significantly reduce any new
[[Page 67659]]
recordkeeping requirement with respect to such employees.
For all of these reasons, the Department is adopting Sec. 13.25(a)
essentially as proposed, although it has made certain modifications to
ensure that certain provisions expressly refer to all relevant records
and removed two entries from the list that are no longer necessary.
Specifically, the Department has clarified that the reference to
``wages paid'' under Sec. 13.25(a)(3) and Sec. 13.25(a)(6) includes
all ``pay and benefits'' as those terms are used in Sec. 13.5(c)(3),
which requires covered contractors to provide to an employee using paid
sick leave the same pay and benefits (that is, both wages and any other
benefits, such as but not limited to contributions toward a fringe
benefit plan) the employee would have received had the employee not
been absent from work. The addition of new language to Sec.
13.25(a)(3) and Sec. 13.25(a)(6) clarifies that contractors must make
and maintain records of benefits, such as any contributions they make
to a fringe benefit plan on an employee's behalf. Because the
clarification compels covered contractors to maintain documentation to
demonstrate that they have complied with Sec. 13.5(c)(3), it will
facilitate the Department's efforts to enforce the Order and its
implementing regulations. The additional language is also generally
consistent with the DBA and SCA recordkeeping requirements under 29 CFR
5.5(a)(3)(i) and 4.6(g)(1)(ii), respectively. Additionally, the
Department has modified Sec. 13.25(a)(10) to reflect that contractors
must maintain records of not just written denials of requests to use
paid sick leave, but all written responses, including approvals of such
requests if in writing as well as denials, including explanations for
such denials as required under Sec. 13.5(d)(3). Although under Sec.
13.5(d)(3)(i), contractors are not required to grant employees'
requests to use paid sick leave in writing, if they do, maintaining
such records will facilitate any investigation by the WHD that might
occur. The Department removed Sec. 13.5(a)(13) and Sec. 13.5(a)(14)
because the certified list requirement, which was necessary only to
implement the requirement that successor contractors reinstate paid
sick leave of employees who worked for the predecessor contractor, no
longer appears. The entries that follow have been renumbered
accordingly. The Department has also inserted as Sec. 13.25(a)(14) the
requirement that contractors make and maintain records of the regular
pay and benefits provided to an employee for each use of paid sick
leave. This provision makes explicit that records of such payments are
required regardless of whether they are technically included in wages
as referred to in Sec. 13.25(a)(6). Finally, the Department inserted
as Sec. 13.25(a)(15) a requirement that a contractor make and maintain
records of any financial payment made for unused paid sick leave upon a
separation from employment that, pursuant to Sec. 13.5(b)(5), relieves
a contractor from the obligation to reinstate such paid sick leave as
otherwise required by Sec. 13.5(b)(4). This provision follows from the
change to Sec. 13.5(b)(5) described above; because financial payments
can under the Final Rule affect a contractor's reinstatement
obligation, it would be important in any investigation that a
contractor have records showing that such payments were made.
Proposed Sec. 13.25(b) related to the segregation of employees'
covered and non-covered work for a single contractor. It provided that
in order for a contractor to distinguish between an employee's covered
and non-covered work (such as time spent performing work on or in
connection with a covered contract versus time spent performing work on
or in connection with non-covered contracts or time spent performing
work on or in connection with a covered contract in the United States
versus time spent performing work outside the United States, or to
establish that time spent performing solely in connection with covered
contracts constituted less than 20 percent of an employee's hours
worked during a particular workweek), the contractor would be required
to keep records or other proof reflecting such distinctions. It further
provided that only if the contractor adequately segregated the
employee's time would time spent on non-covered work be excluded from
hours worked counted toward the accrual of paid sick leave, and that
similarly, only if that contractor adequately segregated the employee's
time could a contractor properly deny an employee's request to take
leave under Sec. 13.5(d) on the ground that the employee was scheduled
to perform non-covered work during the time he asked to use paid sick
leave.
The HR Policy Association and the ERISA Industry Committee
commented that it would be difficult for covered contractors to
implement Sec. 13.25(b) with respect to those employees that might be
spending less than 20 percent of hours worked in a workweek in
connection with covered contracts and sought a 1-year grace period for
contractors to make necessary modifications to their human resource
systems to enable compliance with the requirements of Sec. 13.25(b).
EEAC and Seyfarth Shaw similarly expressed that tracking the hours of
individuals working in connection with a covered contract would be
challenging. The language in proposed Sec. 13.25(b) is consistent with
the treatment of hours worked on SCA- and non-SCA-covered contracts,
see 29 CFR 4.178, 4.179, as well as the treatment of covered versus
non-covered time under the Minimum Wage Executive Order rulemaking, see
79 FR 60659, 60660-61, 60672. Thus, many, if not most, covered
contractors will have experience in segregating hours worked in the
manner required by proposed Sec. 13.25(b). In addition, requiring
contractors that wish to distinguish between covered and non-covered
time to keep adequate records reflecting that distinction would
implement section 4(a) of the Order because it would facilitate the
Department's investigation of potential violations of, and assist in
obtaining compliance with, the Order. For these reasons, the Department
declines to provide the grace period requested by HR Policy Association
and the ERISA Industry Committee and adopts Sec. 13.25(b) in the Final
Rule as proposed. However, the Department has re-designated proposed
Sec. 13.25(b) as subparagraph (1) in the Final Rule because of the
insertion of subparagraph (2), described below.
As explained above in the discussion of Sec. 13.5(a)(i) and (iii),
the Department has amended those provisions in response to comments to
allow contractors to estimate an employee's covered hours worked in
connection with covered contracts provided that the estimate is
reasonable and based on verifiable information. New Sec. 13.25(b)(2)
reflects this change by providing that if a contractor estimates
covered hours worked by an employee who performs work in connection
with covered contracts pursuant to Sec. 13.5(a)(i) or (iii), the
contractor must keep records or other proof of the verifiable
information on which such estimates are reasonably based. It further
provides that only if the contractor relies on an estimate that is
reasonable and based on verifiable information will an employee's time
spent in connection with non-covered contracts be excluded from hours
worked counted toward the accrual of paid sick leave. Finally, the new
regulatory text notes, as explained in the discussion of Sec.
13.5(c)(1) above, that if a contractor estimates the amount of time an
employee spends performing work in connection with covered contracts,
the contractor must permit
[[Page 67660]]
the employee to use her paid sick leave during any work time for the
contractor.
Proposed Sec. 13.25(c) excused a contractor from maintaining
records of the employee's number of daily and weekly hours worked as
otherwise required under Sec. 13.25(a)(4) if the SCA, DBA, or FLSA do
not require the contractor to keep records of the employee's hours
worked, such as because the employee is employed in a bona fide
executive, administrative, or professional capacity as those terms are
defined in 29 CFR part 541, and the contractor elected to use the
assumption permitted by Sec. 13.5(a)(1)(iii). The Department received
no specific comments on proposed Sec. 13.25(c) and implements the
provision without modification.
Proposed Sec. 13.25(d) addressed requirements related to the
confidentiality of records. Proposed Sec. 13.25(d)(1) required a
contractor to maintain as confidential in separate files/records from
the usual personnel files any records relating to medical histories or
domestic violence, sexual assault, or stalking created by or provided
to a contractor for purposes of Executive Order 13706, whether of an
employee or an employee's child, parent, spouse, domestic partner, or
other individual related by blood or affinity whose close association
with the employee is the equivalent of a family relationship. Proposed
Sec. 13.25(d)(2) required records or documents created to comply with
the recordkeeping requirements in proposed part 13 that are subject to
the confidentiality requirements of the Genetic Information
Nondiscrimination Act of 2008 (GINA), Public Law 110-233, 122 Stat. 881
(2008), and/or the Americans with Disabilities Act (ADA), 42 U.S.C.
12101 et seq., to be maintained in compliance with the confidentiality
requirements of those statutes as described in 29 CFR 1635.9 and
1630.14(c)(1), respectively. Proposed Sec. 13.25(d)(3) prohibited the
disclosure of any documentation used to verify the need to use 3 or
more consecutive days of paid sick leave for the purposes listed in
Sec. 13.5(c)(1)(iv), and required the contractor to maintain
confidentiality about any domestic violence, sexual assault, or
stalking, unless the employee consents or the disclosure is required by
law.
The Department has modified proposed Sec. 13.25(d)(2) to clarify
that the confidentiality requirements of the GINA and the ADA apply to
medical information contained in records or documents that a contractor
creates or receives in connection with compliance with part 13. This
modification aims to more clearly fulfill the intent of proposed Sec.
13.25(d)(2), which was to ensure that to the extent compliance with the
Order and its implementing regulations resulted in a contractor
possessing documents to which the GINA and/or the ADA confidentiality
requirements apply, the contractor must maintain those documents
consistent with the GINA's and/or the ADA's confidentiality
requirements. The Department received no specific comments related to
proposed Sec. 13.25(d), and with the exception of this modification,
the Department adopts Sec. 13.25(d) as proposed.
Proposed Sec. 13.25(e) required contractors to permit authorized
representatives of the WHD to conduct interviews with employees at the
worksite during normal working hours. This provision was derived from
similar provisions under the SCA and DBA, 29 CFR 4.6(g)(4) (SCA); 29
CFR 5.5(a)(3)(iii) (DBA), and would facilitate the WHD's ability to
enforce the Order and part 13. The Department received no comments
related to proposed Sec. 13.25(e) and retains the provision as
proposed.
Proposed Sec. 13.25(f) stated that nothing in part 13 limits or
otherwise modifies the contractor's recordkeeping obligations, if any,
under the DBA, SCA, FLSA, FMLA, Executive Order 13658, their
implementing regulations, or other applicable law. The Department
received no comments regarding this provision and adopts it without
change.
Certified List of Employees' Accrued Paid Sick Leave
Proposed Sec. 13.26 required a predecessor prime contractor to
provide to the contracting officer, upon completion of a covered
contract, a certified list of the names of all employees entitled to
paid sick leave under Executive Order 13706 and part 13 who worked on
or in connection with the covered contract or any covered
subcontract(s) at any point during the 12 months preceding the date of
completion of the contract; the date each such employee separated from
the contract or any covered subcontract(s) if prior to the date of the
completion of the contract; and the amount of paid sick leave each such
employee had available for use as of the date of completion of the
contract or the date each such employee separated from the contract or
subcontract. This requirement was intended to facilitate compliance by
successor contractors with the requirement set forth in Sec.
13.5(b)(4) that paid sick leave be reinstated for employees rehired by
a successor contractor within 12 months of the job separation from the
predecessor contractor. Because (for reasons explained above) that
provision does not appear in the Final Rule, proposed Sec. 13.26 is no
longer necessary and also does not appear in the Final Rule.
Section 13.26 Notice
Proposed Sec. 13.27 addressed the obligations of contractors with
respect to notice to employees of their rights under Executive Order
13706 and part 13. Proposed Sec. 13.27(a) required that contractors
notify all employees performing work on or in connection with a covered
contract of the paid sick leave requirements of Executive Order 13706
and part 13 by posting a notice provided by the Department of Labor in
a prominent and accessible place at the worksite so it would be readily
seen by employees. The Department derived this proposal from the
Executive Order 13658 Final Rule at 29 CFR 10.29(b). 79 FR 60670. This
proposal differed from the Minimum Wage Executive Order regulations,
however, in that it required all covered contractors, including those
whose contracts are DBA- or SCA-covered, to display the poster rather
than allowing DBA and SCA contractors to provide notice solely on wage
determinations. This difference was based on the Department's belief
that, because the Order's paid sick leave requirements require
lengthier explanation than the minimum wage requirements of Executive
Order 13658, and because those requirements are sufficiently detailed
such that the Department did not propose to describe them in full on
wage determinations, employees working on or in connection with DBA-
and SCA-covered contracts would be more adequately informed about the
paid sick leave requirements by a poster. The Department stated in the
NPRM that it would make a poster, modeled on the Minimum Wage Executive
Order poster, available on the WHD Web site.
Numerous commenters, including Voices for Vermont's Children,
USAction, the NYC Department of Consumer Affairs, and NETWORK,
supported the requirement that contractors prominently post notices
regarding paid sick leave for employees to see. The National
Partnership suggested that the Department additionally require
contractors to provide employees with individual written notice of the
paid sick leave requirements, either when they begin employment with
the contractor or as soon as practicable if they are already employed.
The Department declines to adopt this suggestion because it believes
the notice poster and notification of paid sick leave accrual
requirements in Sec. 13.5(a)(2) will suffice to inform
[[Page 67661]]
employees that they are entitled to paid sick leave. The Department
therefore adopts Sec. 13.27(a) as proposed, except that it appears in
the Final Rule as Sec. 13.26(a) because of the removal of proposed
Sec. 13.26 as explained above.
Proposed Sec. 13.27(b), derived from the Executive Order 13658
Final Rule at 29 CFR 10.29(c), permitted contractors that customarily
post notices to employees electronically to post the notice
electronically, provided such electronic posting is displayed
prominently on any Web site maintained by the contractor, whether
external or internal, and is customarily used for notices to employees
about terms and conditions of employment. The Department received no
specific comments on proposed Sec. 13.27(b) and retains the section in
its proposed form, except that it appears in the Final Rule as Sec.
13.26(b).
Section 13.27 Timing of Pay
Proposed Sec. 13.28 described the time by which a contractor must
compensate employees for hours during which they used paid sick leave.
Under the proposed provision, a contractor was required to provide such
compensation no later than one pay period following the end of the
regular pay period in which the paid sick leave was used. The proposed
timing of the payment obligation imposed was consistent with both the
SCA's and Executive Order 13658's implementing regulations. See 29 CFR
4.165(a) (SCA); 29 CFR 10.25 (Executive Order 13658). The Department
received no specific comments on proposed Sec. 13.28 and accordingly
adopts the provision without change, except that it appears in the
Final Rule as Sec. 13.27 because of the removal of proposed Sec.
13.26.
Subpart D--Enforcement
Subpart D implements section 4 of Executive Order 13706, which
grants the Secretary ``authority for investigating potential violations
of and obtaining compliance with the order,'' 80 FR 54699, by setting
forth remedies, procedures, and enforcement processes. Subpart D is
largely based on subpart D of the Minimum Wage Executive Order
regulations in 29 CFR part 10, which incorporated relevant regulatory
provisions under the FLSA, SCA, and DBA, as well as certain enforcement
procedures set forth in the Department's regulations implementing the
Nondisplacement Executive Order. Subpart D differs in some respects
from the analogous provisions in the Minimum Wage Executive Order
regulations because of the differences between minimum wage and paid
sick leave requirements and because Executive Order 13706 contemplates
that the Department would also incorporate FMLA provisions to the
extent practicable.
Subpart D establishes a procedure for filing complaints with the
WHD, creates an informal complaint resolution process between the WHD
and parties alleged to be in violation of the Order, details the WHD's
investigation procedures under the Order, and provides remedies and
sanctions for violations of the Order, including monetary relief,
liquidated damages, and debarment, as well as processes for collection
of underpayments. As noted in the NPRM, the Department believes subpart
D will facilitate investigations of potential violations of the Order,
allow for violations of the Order to be addressed and remedied, and
promote compliance with the Order. The Department received numerous
comments generally supporting the proposed enforcement provisions as
reasonable, strong, and critical to protecting workers' rights and
discouraging violation of the law; as explained in more detail below,
the Department is adopting subpart D as proposed.
Section 13.41 Complaints
The Department proposed a procedure for filing complaints in Sec.
13.41 identical to that which appears in 29 CFR 10.41, the analogous
section of the Minimum Wage Executive Order Final Rule. Proposed Sec.
13.41(a) provided that any employee, contractor, labor organization,
trade organization, contracting agency, or other person or entity that
believes a violation of the Executive Order or part 13 has occurred
could file a complaint with any office of the WHD. It also provided
that no particular form of complaint is required; a complaint could be
filed orally or in writing, and WHD would accept a complaint in any
language if the complainant was unable to file it in English. Proposed
Sec. 13.41(b) stated the well-established policy of the Department
with respect to confidential sources. See 29 CFR 4.191(a); 29 CFR
5.6(a)(5). Specifically, it provided that it is the Department's policy
to protect the identity of its confidential sources and to prevent an
unwarranted invasion of personal privacy. Accordingly, the provision
stated that the identity of any individual who makes a written or oral
statement as a complaint or in the course of an investigation, as well
as portions of the statement which would reveal the individual's
identity, would not be disclosed in any manner to anyone other than
Federal officials without the prior consent of the individual. The
proposed provision further provided that disclosure of such statements
would be governed by the provisions of the Freedom of Information Act,
5 U.S.C. 552, 29 CFR part 70, and the Privacy Act of 1974, 5 U.S.C.
552. Many commenters, including Jobs With Justice, Demos, Women
Employed, the National Hispanic Council on Aging, and the National
Employment Lawyers Association (NELA), generally supported allowing
employees to file complaints with the WHD. No commenter suggested any
change to this provision, and the Department adopts it as proposed.
Section 13.42 Wage and Hour Division Conciliation
Proposed Sec. 13.42, which was identical to 29 CFR 10.42,
established an informal complaint resolution process for complaints
filed with the WHD. The provision allowed the WHD, after obtaining the
necessary information from the complainant regarding the alleged
violations, to contact the party against whom the complaint was lodged
and attempt to reach an acceptable resolution through conciliation. The
Department received no comments regarding this provision and adopts
Sec. 13.42 without modification.
Section 13.43 Wage and Hour Division Investigation
Proposed Sec. 13.43, which outlined the WHD's investigative
authority, was identical to 29 CFR 10.43. That section of the Minimum
Wage Executive Order Final Rule was derived primarily from regulations
implementing the SCA and DBA. See 79 FR 60679 (citing 29 CFR 4.6(g)(4),
29 CFR 5.6(b)). Proposed Sec. 13.43 permitted the Administrator to
initiate an investigation either as the result of a complaint or at any
time on his or her own initiative. Under the proposal, as part of the
investigation, the Administrator was entitled to conduct interviews
with the contractor, as well as the contractor's employees at the
worksite during normal work hours; inspect the relevant contractor's
records (including contract documents and payrolls, if applicable);
make copies and transcriptions of such records; and require the
production of any documentary or other evidence the Administrator deems
necessary to determine whether a violation, including conduct
warranting imposition of debarment, has occurred. The proposed section
also required Federal agencies and contractors to cooperate with
authorized representatives of the Department in the
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inspection of records, in interviews with employees, and in all aspects
of investigations. The Department received no comments requesting any
change to this provision and therefore implements it as proposed.
Section 13.44 Remedies and Sanctions
In proposed Sec. 13.44, the Department set forth remedies and
sanctions for violations of the Order and part 13. Proposed Sec.
13.44(a) provided for remedies for violations of the prohibition on
interference with the accrual or use of paid sick leave described in
Sec. 13.6(a). Proposed Sec. 13.44(a) provided that when the
Administrator determines that a contractor has interfered with an
employee's accrual or use of the paid sick leave in violation of Sec.
13.6(a), the Administrator would notify the contractor and the relevant
contracting agency of the interference and request the contractor to
remedy the violation. It additionally proposed that if the contractor
does not remedy the violation, the Administrator would direct the
contractor to provide any appropriate relief to the affected
employee(s) in the Administrator's investigation findings letter issued
pursuant to Sec. 13.51. The Department further proposed that such
relief may include any pay and/or benefits denied or lost by reason of
the violation; other actual monetary losses sustained as a direct
result of the violation; or appropriate equitable or other relief.
Proposed relief also included an amount equaling any monetary relief as
liquidated damages unless such amount was reduced by the Administrator
because the violation was in good faith and the contractor had
reasonable grounds for believing it had not violated the Order or part
13. The types of relief available under proposed Sec. 13.44(a) were
derived from the FMLA, 29 U.S.C. 2617(a)(1), 2617(b)(2), and its
implementing regulations, 29 CFR 825.400(c). Important aspects of these
FMLA remedies, such as the inclusion of liquidated damages, are also
part of the FLSA scheme. See 29 U.S.C. 216(b), 260. As noted in the
NPRM, under the FLSA and FMLA--and by extension, under Executive Order
13706 and part 13--liquidated damages serve the purpose of compensating
employees for the delay in receiving wages owed rather than punishing
the employer who violated the statute. See, e.g., Herman v. RSR Sec.
Servs. Ltd., 172 F.3d 132, 142 (2d Cir. 1999) (FLSA); Jordan v. U.S.
Postal Serv., 379 F.3d 1196, 1202 (10th Cir. 2004) (FMLA).
As the Department explained in the NPRM, under the regulatory text,
an example of a possible remedy includes payment for time for which a
contractor improperly denied a request to use paid sick leave such that
the employee took unpaid leave that should have been treated as paid
sick leave. In that case, the damages would be the pay and benefits the
employee would have received for that time pursuant to Sec.
13.5(c)(3), and the award would include an equal amount of liquidated
damages unless the violation was made in good faith and the contractor
had reasonable grounds for believing it had not violated the Order or
part 13. As another example, if a contractor improperly denied a
request to use paid sick leave such that an employee came to work and
hired a babysitter to care for a sick child with whom the employee
wished to stay home, the remedy would be the amount the employee spent
on the child care, and the award would include an equal amount of
liquidated damages unless the violation was made in good faith and the
contractor had reasonable grounds for believing it had not violated the
Order or part 13. In this example, relief would not include lost pay or
benefits because the employee did not lose pay or benefits due to the
violation. The Department stated in the NPRM that equitable relief
could include, but was not limited to, requiring the contractor to
allow for accrual and use of paid sick leave by an employee it
erroneously treated as not covered by the Executive Order or requiring
the contractor to restore paid sick leave it improperly deducted from
an employee's accrued paid sick leave.
Many commenters, including the NYC Department of Consumer Affairs,
the Seattle Office of Labor Standards, NELP, the Coalition on Human
Needs, and CLASP, supported including liquidated damages as a remedy
for violations of the Order. EEAC, however, opposed the Department's
proposal to allow for liquidated damages, noting that the Order directs
that its implementing regulations should incorporate remedies from the
Minimum Wage Executive Order rulemaking, which does not provide for
liquidated damages.
After careful consideration, the Department will not follow EEAC's
suggestion to remove liquidated damages as an available remedy for
violations of the Order and part 13. The Executive Order requires the
Department to incorporate procedures and remedies not solely from the
Minimum Wage Executive Order rulemaking, but also the FLSA and,
notably, the FMLA, and as explained above, those statutes provide for
liquidated damages. Furthermore, monetary relief for violations of the
Order and part 13 will often be limited because the monetary value of
paid sick leave is limited. Liquidated damages in the amount of any
monetary relief is therefore an important mechanism for ensuring that
employees who suffer violations are adequately compensated.
Proposed Sec. 13.44(a) also provided that the Administrator could
direct that payments due on the contract or any other contract between
the contractor and the Federal Government be withheld as may be
necessary to provide any appropriate monetary relief, and that, upon
the final order of the Secretary that monetary relief is due, the
Administrator could direct the relevant contracting agency to transfer
the withheld funds to the Department for disbursement. These portions
of the proposed provision were identical to language in the Minimum
Wage Executive Order Final Rule. See 29 CFR 10.44(a). The Department
received no comments regarding this portion of the proposed provision.
For the reasons explained, the Department adopts Sec. 13.44(a) as
proposed.
Proposed Sec. 13.44(b) set out remedies for violations of the
prohibition on discrimination in Sec. 13.6(b). It provided that when
the Administrator determines that a contractor has discriminated
against an employee in violation of Sec. 13.6(b), the Administrator
would notify the contractor and the relevant contracting agency of the
discrimination and request that the contractor remedy the violation. It
further provided that if the contractor does not remedy the violation,
the Administrator would direct the contractor to provide any
appropriate relief, including but not limited to employment,
reinstatement, promotion, restoration of leave, or lost pay and/or
benefits, in the Administrator's investigation findings letter issued
pursuant to Sec. 13.51. As proposed, Sec. 13.44(b) also provided that
an amount equaling any monetary relief could be awarded as liquidated
damages unless such amount is reduced by the Administrator because the
violation was in good faith and the contractor had reasonable grounds
for believing the contractor had not violated the Order or part 13.
This language was derived from the FMLA remedies set forth in 29 U.S.C.
2617(a)(1) and 29 CFR 825.400(c); see also 29 U.S.C. 2617(b)(2). It was
similar to the analogous provision in the Minimum Wage Executive Order
rulemaking, 79 FR 60728 (codified at 29 CFR 10.44(b)), which was
derived from the remedies provided for under the FLSA's anti-
retaliation provision, see 29 U.S.C. 216(b), except that the proposed
provision allowed for liquidated
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damages, a remedy available under the FMLA, 29 U.S.C. 2617(a)(1), and
the FLSA, 29 U.S.C. 216(b), 260. Proposed Sec. 13.44(b) further noted
that the Administrator could additionally direct that payments due on
the contract or any other contract between the contractor and the
Federal Government be withheld as may be necessary to provide any
appropriate monetary relief and that upon the final order of the
Secretary that monetary relief is due, the Administrator could direct
the relevant contracting agency to transfer the withheld funds to the
Department of Labor for disbursement. Comments supporting and opposing
the inclusion of liquidated damages in Sec. 13.44(a) also apply to
Sec. 13.44(b), and for the reasons described above, the Department is
continuing to allow for that remedy. Accordingly, this provision is
implemented as proposed.
Proposed Sec. 13.44(c) addressed the remedies for violations of
the recordkeeping requirements in subpart C. It provided that when a
contractor fails to comply with the requirements of Sec. 13.25 in
violation of Sec. 13.6(c), the Administrator would request that the
contractor remedy the violation. Proposed Sec. 13.44(c) further
provided that if a contractor fails to produce required records upon
request, the contracting officer, upon direction of an authorized
representative of the Department of Labor, or under its own action,
would take such action as necessary to cause suspension of any further
payment or advance of funds on the contract until such time as the
violations are discontinued. PSC asserted that it would be unreasonable
to suspend contract payments simply because a contractor failed to
produce records upon request. The Department declines to modify
proposed Sec. 13.44(c) because any such suspension would end when the
recordkeeping violations are discontinued, and because the section is
consistent with and was derived from paragraph (g)(3) of the Minimum
Wage Executive Order contract clause, 79 FR 60731, the analogous
provision of the SCA regulations, 29 CFR 4.6(g)(3), and the analogous
provision of the DBA regulations, 29 CFR 5.5(a)(3)(iii). The Department
therefore adopts this provision without change other than the insertion
of a reference to a guarantee of funds for the reasons explained in the
discussion of Sec. 13.11(c).
Proposed Sec. 13.44(d), which was effectively identical to the
corresponding provision in the Minimum Wage Executive Order rulemaking,
29 CFR 10.44(c), allowed for the remedy of debarment. Specifically, it
provided that whenever a contractor is found by the Secretary to have
disregarded its obligations under Executive Order 13706 or part 13,
such contractor and its responsible officers, and any firm,
corporation, partnership, or association in which the contractor or
responsible officers have an interest, would be ineligible to be
awarded any contract or subcontract subject to the Executive Order for
a period of up to 3 years from the date of publication of the name of
the contractor or responsible officer on the excluded parties list
currently maintained on the System for Award Management Web site,
http://www.SAM.gov. The ``disregarded its obligations'' standard, which
is also used in the Minimum Wage Executive Order rulemaking, was
derived from the DBA implementing regulations at 29 CFR 5.12(a)(2). See
79 FR 60680. Proposed Sec. 10.44(d) further provided that neither an
order of debarment of any contractor or its responsible officers from
further Government contracts nor the inclusion of a contractor or its
responsible officers on a published list of noncomplying contractors
under this section would be carried out without affording the
contractor or responsible officers an opportunity for a hearing before
an Administrative Law Judge (ALJ).
Debarment is a long-established remedy for a contractor's failure
to fulfill its labor standards obligations under the SCA and the DBA,
see 41 U.S.C. 6706(b); 40 U.S.C. 3144(b); 29 CFR 4.188(a); 29 CFR
5.5(a)(7); 29 CFR 5.12(a)(2), and one that, as noted, was adopted in
the Minimum Wage Executive Order rulemaking, see 79 FR 60728 (codified
at 29 CFR 10.44(c)). In the NPRM, the Department explained that the
possibility that a contractor will be unable to obtain Government
contracts for a fixed period of time due to debarment promotes
contractor compliance with the SCA, DBA, and Minimum Wage Executive
Order, and the Department intended inclusion of the remedy in the NPRM
to incentivize compliance with Executive Order 13706 as well.
A Better Balance, Innovation Ohio, the National Partnership, Equal
Rights Advocates, CPD, and numerous other commenters endorsed the
debarment of contractors found to have violated the Order and part 13
as an appropriate remedy. The Department therefore implements Sec.
13.44(d) as proposed.
Proposed Sec. 13.44(e) allowed for initiation of an action,
following a final order of the Secretary, against a contractor in any
court of competent jurisdiction to collect underpayments when the
amounts withheld under Sec. 13.11(c) are insufficient to reimburse all
monetary relief due. Proposed Sec. 13.44(e) also authorized initiation
of an action, following the final order of the Secretary, in any court
of competent jurisdiction when there are no payments available to
withhold. Such circumstances could arise, for example, if at the time
the Administrator discovers a contractor owes monetary relief to
employees, no payments remain owing under the contract or another
contract between the same contractor and the Federal Government, or if
the covered contract is a concessions contract under which the
contractor does not receive payments from the Federal Government.
Proposed Sec. 13.44(e) additionally provided that any sums the
Department recovers would be paid to affected employees to the extent
possible, but that sums not paid to employees because of an inability
to do so within 3 years would be transferred into the Treasury of the
United States. Proposed Sec. 13.44(e) was derived from the analogous
provision of the Minimum Wage Executive Order rulemaking, 29 CFR
10.44(d), which in turn was derived from the SCA, 41 U.S.C. 6705(b)(2).
No comments addressed this provision specifically and the Department
adopts it as proposed.
In proposed Sec. 13.44(f), the Department addressed what remedy
would be available when a contracting agency fails to include the
contract clause in a contract subject to the Executive Order. It
provided that the contracting agency, on its own initiative or within
15 calendar days of notification by the Department, would incorporate
the clause in the contract retroactive to commencement of performance
under the contract through the exercise of any and all authority that
may be needed (including, where necessary, its authority to negotiate
or amend, its authority to pay any necessary additional costs, and its
authority under any contract provision authorizing changes,
cancellation, and termination). This provision was identical to 29 CFR
10.44(e); in promulgating that provision during the Minimum Wage
Executive Order rulemaking, the Department explained that this clause
would provide the Administrator authority to collect underpayments on
behalf of affected employees on the applicable contract retroactive to
commencement of performance under the contract. 79 FR 60681. The
Department also noted in that rulemaking that the Administrator
possesses comparable authority under the DBA. Id. (citing 29 CFR
1.6(f)). The Department explained in the NPRM that a mechanism for
addressing a failure to
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include the contract clause in a contract subject to Executive Order
13706 would further the interest in both remedying violations and
obtaining compliance with the Order, as it did with respect to the
Minimum Wage Executive Order. Furthermore, as also noted in the Minimum
Wage Executive Order rulemaking, the proposed provision included
language reflecting the Department's belief that a contractor is
entitled to an adjustment where necessary to pay any necessary
additional costs when a contracting agency initially omits and then
subsequently includes the contract clause in a covered contract. Id.
(citing 29 CFR 4.5(c), the SCA regulation with which this position is
consistent). As noted above, PSC requested that the Department
expressly require a price or cost adjustment when a contracting agency
fails to include the contract clause in a covered contract. For the
reasons explained in the discussion of Sec. 13.11(b), Sec. 13.44(f)
is implemented without change.
Subpart E--Administrative Proceedings
Pursuant to section 4 of Executive Order 13706, subpart E
establishes and describes the administrative proceedings to be
conducted under the Order. In compliance with section 3(c) of the
Order, proposed subpart E incorporates, to the extent practicable, the
DBA, SCA, and Executive Order 13658 administrative procedures the
Department believes are necessary to remedy potential violations and
ensure compliance with the Executive Order. Indeed, the Department
substantially modeled subpart E on subpart E of the Minimum Wage
Executive Order Final Rule, which was primarily derived from the rules
governing administrative proceedings conducted under the DBA and SCA.
79 FR 60682. The administrative procedures included in subpart E also
closely adhere to existing procedures of the Department's Office of
Administrative Law Judges and Administrative Review Board (ARB).
Section 13.51 Disputes Concerning Contractor Compliance
Proposed Sec. 13.51, which the Department derived primarily from
the DBA's implementing regulations at 29 CFR 5.11, addressed how the
Administrator would process disputes regarding a contractor's
compliance with part 13. Specifically, proposed Sec. 13.51(a) provided
that the Administrator or a contractor could initiate a proceeding. The
Department received no comments regarding this provision, and it is
adopted as proposed.
Proposed Sec. 13.51(b)(1) provided that when it appears that
relevant facts are at issue in a dispute covered by Sec. 13.51(a), the
Administrator would notify the affected contractor(s) and the prime
contractor, if different, of the investigative findings by certified
mail to the last known address. The preamble to the proposal further
stated that if the Administrator determines that there are reasonable
grounds to believe the contractor(s) should be subject to debarment,
the investigative findings letter would so indicate. Proposed Sec.
13.51(b)(2) required a contractor desiring a hearing concerning the
investigative findings letter to request a hearing by letter postmarked
within 30 calendar days of the date of the Administrator's letter. It
further required the request to set forth those findings in dispute
with respect to the violation(s) and/or debarment, as appropriate, and
to explain how such findings are in dispute, including by reference to
any applicable affirmative defenses.
Proposed Sec. 13.51(b)(3) required the Administrator, upon receipt
of a timely request for hearing, to refer the matter to the Chief
Administrative Law Judge by Order of Reference for designation of an
ALJ to conduct such hearings as may be necessary to resolve the
disputed matter in accordance with the procedures set forth in 29 CFR
part 6. It also required the Administrator to attach a copy of the
Administrator's letter, and the response thereto, to the Order of
Reference that the Administrator sent to the Chief Administrative Law
Judge.
The Department did not receive any requests to alter Sec. 13.51(b)
and implements it as proposed.
Proposed Sec. 13.51(c)(1) applied in circumstances when it appears
there are no relevant facts at issue and there is not at that time
reasonable cause to institute debarment proceedings. It required the
Administrator to notify the contractor, by certified mail to the
contractor's last known address, of the investigative findings and to
issue a ruling on any issues of law known to be in dispute.
Proposed Sec. 13.51(c)(2)(i) applied when a contractor disagrees
with the Administrator's factual findings or believes there are
relevant facts in dispute. It required the contractor to advise the
Administrator of such disagreement by letter postmarked within 30
calendar days of the date of the Administrator's letter. Under the
NPRM, the contractor was also required to explain in detail the facts
alleged to be in dispute and attach any supporting documentation with
its response.
Proposed Sec. 13.51(c)(2)(ii) required that the information
submitted in the response alleging the existence of a factual dispute
must be timely in order for the Administrator to examine such
information. Under the NPRM, where the Administrator determined there
was a relevant issue of fact, the Administrator would refer the case to
the Chief Administrative Law Judge. If the Administrator determined
there was no relevant issue of fact, the Administrator would so rule
and advise the contractor accordingly.
Proposed Sec. 13.51(c)(3) applied where a contractor desires
review of a ruling issued by the Administrator under proposed Sec.
13.51(c)(1) or the final sentence of proposed Sec. 13.51(c)(2)(ii). It
required a contractor to file any petition for review with the ARB
postmarked within 30 calendar days of the Administrator's ruling, with
a copy thereof to the Administrator. It further required the petitioner
to file its petition in accordance with the procedures set forth in 29
CFR part 7.
The Department received no comments addressing Sec. 13.51(c) and
adopts it without modification.
Proposed Sec. 13.51(d) provided that the Administrator's
investigative findings letter would become the final order of the
Secretary if a timely response to the letter is not made or a timely
petition for review is not filed. It additionally provided that if a
timely response or a timely petition for review is filed, the
investigative findings letter would be inoperative unless and until the
decision is upheld by an ALJ or the ARB, or the letter otherwise
becomes a final order of the Secretary. No comments addressed Sec.
13.51(d), and the Department implements it as proposed.
Section 13.52 Debarment Proceedings
Proposed Sec. 13.52 addressed debarment proceedings and was
identical to the analogous provision in the Minimum Wage Executive
Order regulations, 29 CFR 10.52, which the Department primarily derived
from the DBA implementing regulations at 29 CFR 5.12. 79 FR 60683.
Proposed Sec. 13.52(a) provided that whenever any contractor is found
by the Secretary of Labor to have disregarded its obligations to
employees or subcontractors under Executive Order or part 13, such
contractor and its responsible officers, and any firm, corporation,
partnership, or association in which such contractor or responsible
officers have an interest, would be ineligible for a period of up to 3
years to receive any contracts or subcontracts subject to the Executive
Order from the date of publication of the name or names of the
contractor or
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persons on the excluded parties list currently maintained on the System
for Award Management Web site, http://www.SAM.gov. The Department
received no comments addressing this provision and adopts it as
proposed.
Proposed Sec. 13.52(b)(1) provided that where the Administrator
finds reasonable cause to believe a contractor has committed a
violation of the Executive Order or part 13 that constitutes a
disregard of its obligations to its employees or subcontractors, the
Administrator would notify, by certified mail to the last known
address, the contractor and its responsible officers (and any firms,
corporations, partnerships, or associations in which the contractor or
responsible officers are known to have an interest) of the finding.
Under proposed Sec. 13.52(b)(1), the Administrator would additionally
furnish those notified a summary of the investigative findings and
afford them an opportunity for a hearing regarding the debarment issue.
Those notified would have to request a hearing on the debarment issue,
if desired, by letter to the Administrator postmarked within 30
calendar days of the date of the letter from the Administrator. The
letter requesting a hearing would need to set forth any findings that
were in dispute and the reasons therefore, including any affirmative
defenses to be raised.
Proposed Sec. 13.52(b)(1) also required the Administrator, upon
receipt of a timely request for hearing, to refer the matter to the
Chief Administrative Law Judge by Order of Reference, to which would be
attached a copy of the Administrator's investigative findings letter
and the response thereto, for designation to an ALJ to conduct such
hearings as may be necessary to determine the matters in dispute.
Proposed Sec. 13.52(b)(2) provided that hearings under Sec. 13.52
would be conducted in accordance with 29 CFR part 6. Under the
proposal, if no timely request for hearing was received, the
Administrator's findings would become the final order of the Secretary.
The Department did not receive any comments regarding Sec.
13.52(b) and implements the provision as proposed.
Section 13.53 Referral to Chief Administrative Law Judge; Amendment of
Pleadings
Proposed Sec. 13.53, as well as proposed Sec. Sec. 13.54-13.57,
were largely identical to the corresponding provisions in the Minimum
Wage Executive Order rulemaking, 29 CFR 10.53-10.57, and were derived
from the SCA and DBA rules of practice for administrative proceedings
contained in 29 CFR part 6. Proposed Sec. 13.53(a) provided that upon
receipt of a timely request for a hearing under proposed Sec. 13.51
(where the Administrator has determined that relevant facts are in
dispute) or proposed Sec. 13.52 (debarment), the Administrator would
refer the case to the Chief Administrative Law Judge by Order of
Reference, to which would be attached a copy of the investigative
findings letter from the Administrator and the response thereto, for
designation of an ALJ to conduct such hearings as may be necessary to
decide the disputed matters. It further provided that a copy of the
Order of Reference and attachments thereto would be served upon the
respondent and that the investigative findings letter and the response
thereto would be given the effect of a complaint and answer,
respectively, for purposes of the administrative proceeding.
Proposed Sec. 13.53(b) stated that at any time prior to the
closing of the hearing record, the complaint or answer could be amended
with permission of the ALJ upon such terms as the ALJ approves, and
that for proceedings initiated pursuant to proposed Sec. 13.51, such
an amendment could include a statement that debarment action is
warranted under proposed Sec. 13.52. It further provided that such
amendments would be allowed when justice and the presentation of the
merits are served thereby, provided no prejudice to the objecting
party's presentation on the merits would result. It additionally stated
that when issues not raised by the pleadings were reasonably within the
scope of the original complaint and were tried by express or implied
consent of the parties, they would be treated as if they had been
raised in the pleadings, and such amendments could be made as necessary
to make them conform to the evidence. Proposed Sec. 13.53(b) further
provided that the presiding ALJ could, upon reasonable notice and upon
such terms as are just, permit supplemental pleadings setting forth
transactions, occurrences, or events that have happened since the date
of the pleadings and that are relevant to any of the issues involved.
It also authorized the ALJ to grant a continuance in the hearing, or
leave the record open, to enable the new allegations to be addressed.
The Department received no comments addressing this provision and
implements it as proposed.
Section 13.54 Consent Findings and Order
Proposed Sec. 13.54(a) provided that parties could at any time
prior to the ALJ's receipt of evidence or, at the ALJ's discretion, at
any time prior to issuance of a decision, agree to dispose of the
matter, or any part thereof, by entering into consent findings and an
order disposing of the proceeding. Proposed Sec. 13.54(b) provided
that any agreement containing consent findings and an order disposing
of a proceeding in whole or in part would also provide: (1) That the
order would have the same force and effect as an order made after full
hearing; (2) that the entire record on which any order may be based
must consist solely of the Administrator's findings letter and the
agreement; (3) a waiver of any further procedural steps before the ALJ
and the ARB regarding those matters which are the subject of the
agreement; and (4) a waiver of any right to challenge or contest the
validity of the findings and order entered into in accordance with the
agreement. Proposed Sec. 13.54(c) provided that within 30 calendar
days of receipt of any proposed consent findings and order, the ALJ
would accept the agreement by issuing a decision based on the agreed
findings and order, provided the ALJ is satisfied with the proposed
agreement's form and substance. It further provided that if the
agreement disposes of only a part of the disputed matter, a hearing
would be conducted on the matters remaining in dispute. The Department
received no comments addressing this provision, and it adopts Sec.
13.54 as proposed.
Section 13.55 Proceedings of the Administrative Law Judge
Proposed Sec. 13.55 addressed the ALJ's proceedings and decision.
Proposed Sec. 13.55(a) provided that the Office of Administrative Law
Judges has jurisdiction to hear and decide appeals concerning questions
of law and fact from the Administrator's investigative findings letters
issued under Sec. 13.51 and/or Sec. 13.52. The Department received no
comments related to proposed Sec. 13.55(a) and accordingly adopts the
section in its proposed form.
Proposed Sec. 13.55(b) provided that each party could file with
the ALJ proposed findings of fact, conclusions of law, and a proposed
order, together with a supporting brief expressing the reasons for such
proposals, within 20 calendar days of filing of the transcript (or a
longer period if the ALJ permits). It also provided that each party
would serve such documents on all other parties. No comments addressed
Sec. 13.55(b), and the Department adopts it as proposed.
Proposed Sec. 13.55(c)(1) required an ALJ to issue a decision
within a reasonable period of time after receipt of the proposed
findings of fact, conclusions of law, and order, or within
[[Page 67666]]
30 calendar days after receipt of an agreement containing consent
findings and an order disposing of the matter in whole. It further
provided that the decision would contain appropriate findings,
conclusions of law, and an order and be served upon all parties to the
proceeding. Proposed Sec. 13.55(c)(2) provided that if the
Administrator requests debarment, and the ALJ concludes the contractor
has violated the Executive Order or part 13, the ALJ would issue an
order regarding whether the contractor is subject to the excluded
parties list that would include any findings related to the
contractor's disregard of its obligations to employees or
subcontractors under the Executive Order or part 13. The Department
received no comments related to proposed Sec. 13.55(c) and adopts it
without modification.
Proposed Sec. 13.55(d) provided that the Equal Access to Justice
Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings
under part 13 because such proceedings were not required by an
underlying statute to be determined on the record after an opportunity
for an agency hearing. Therefore, the Department reasoned that an ALJ
had no authority to award attorney's fees and/or other litigation
expenses pursuant to the provisions of the EAJA for any proceeding
under part 13.
NELA commented that the rule would be strengthened by adding
language to allow prevailing employees represented by private counsel
to recover attorney's fees and costs in administrative proceedings
brought to enforce and remedy violations of the Order. NELA expressed
the view that the financial loss to a full-time employee who has not
been permitted to accrue or use up to 56 hours per year of paid sick
leave as required under the Order is likely to be minimal, and that
without the ability to recover attorney's fees and costs, it would not
be financially feasible for an employee to retain private counsel, or
economically viable for a private attorney to represent an employee in
this type of complaint.
After careful consideration of this comment, the Department has
decided to retain Sec. 13.55(d) as proposed. Although the Department
agrees that promoting legal representation for employees is a worthy
objective, the Department declines to adopt the recommendation to add
language to permit the recovery of attorney's fees and costs by
prevailing employees in administrative proceedings brought pursuant to
these regulations. The American Rule governing the recovery of
attorney's fees ordinarily requires litigants in court to bear their
own fees and costs, regardless whether they win or lose. See Buckhannon
Bd. & Care Home, Inc. v. West Va. Dep't of Health & Human Res., 532
U.S. 598, 602 (2001). A prevailing party may be entitled to collect
fees from the losing party only pursuant to explicit statutory
authority. See Key Tronic Corp. v. United States, 511 U.S. 809, 819
(1994); In the Matter of Ann P. Harris v. Tennessee Valley Authority,
ARB Case No. 99-004, 2000 WL 2804643, at *3-7 (DOL Adm. Rev. Bd. Nov.
29, 2000) (same, in administrative proceedings before Department of
Labor ALJs or the ARB). Not only does the Order not contain any such
explicit authority, it also specifies that it does not create, and is
not intended to create, any right or benefit, substantive or
procedural, enforceable at law or in equity by any party against the
government or any other person. 80 FR 54699. Rather, pursuant to
subpart E, where the Administrator finds that a violation of the Order
or part 13 has occurred, the WHD shall initiate an enforcement
proceeding, and an employee may participate in, but cannot be a party
to, such a proceeding under the Order, and therefore would not be a
``prevailing party'' for purposes of fee-shifting even if monetary or
other relief were awarded.
Lastly, Sec. 13.44 sets forth remedies and sanctions for
violations of the Order. Relief may include any pay and/or benefits
denied or lost by reason of the violation, other monetary losses
sustained as a direct result of the violation, or appropriate equitable
or other relief, as well as, in certain circumstances, payment of
liquidated damages in an amount equaling any monetary relief. The
Department believes these remedies provide adequate restitution to
employees for violations of the Order, and that the inability of
affected employees to recover attorney's fees and costs does not
represent an impediment to enforcement of Executive Order 13706.
Proposed Sec. 13.55(e) provided that if an ALJ concludes that a
violation of the Executive Order or part 13 occurred, the final order
would mandate action to remedy the violation, including any monetary or
equitable relief described in Sec. 13.44. It also required an ALJ to
determine whether an order imposing debarment is appropriate, if the
Administrator has sought debarment. The Department received no comments
related to proposed Sec. 13.55(e) and accordingly retains the section
as proposed.
Proposed Sec. 13.55(f) provided that the ALJ's decision would
become the final order of the Secretary, provided a party does not
timely appeal the matter to the ARB. The Department received no
comments regarding this provision and adopts it as proposed.
Section 13.56 Petition for Review
The Department proposed Sec. 13.56 as the process to apply to
petitions for review to the ARB from ALJ decisions. Proposed Sec.
13.56(a) provided that within 30 calendar days after the date of the
decision of the ALJ, or such additional time as the ARB grants, any
party aggrieved thereby who desires review must file a petition for
review with supporting reasons in writing to the ARB with a copy
thereof to the Chief Administrative Law Judge. It further required the
petition to refer to the specific findings of fact, conclusions of law,
and order at issue and that a petition concerning a debarment decision
state the disregard of obligations to employees and subcontractors, or
lack thereof, as appropriate. It additionally required a party to serve
the petition for review, and all supporting briefs, on all parties and
on the Chief Administrative Law Judge. It also stated that a party must
timely serve copies of the petition and all supporting briefs on the
Administrator and the Associate Solicitor, Division of Fair Labor
Standards, Office of the Solicitor, U.S. Department of Labor. The
Department received no comments related to proposed Sec. 13.56(a) and
accordingly retains the section in its proposed form.
Proposed Sec. 13.56(b) provided that if a party files a timely
petition for review, the ALJ's decision would be inoperative unless and
until the ARB issues an order affirming the decision, or the decision
otherwise becomes a final order of the Secretary. It further provided
that if a petition for review concerns only the imposition of
debarment, the remainder of the ALJ's decision would be effective
immediately. It additionally stated that judicial review would not be
available unless a timely petition for review to the ARB is first
filed. Failure of the aggrieved party to file a petition for review
with the ARB within 30 calendar days of the ALJ decision would render
the decision final, without further opportunity for appeal. No
commenter addressed proposed Sec. 13.56(b), and the Department
implements it without change.
Section 13.57 Administrative Review Board Proceedings
Proposed Sec. 13.57 outlined the ARB proceedings under the
Executive Order. Proposed Sec. 13.57(a)(1) stated the ARB has
jurisdiction to hear and decide in its discretion appeals from the
[[Page 67667]]
Administrator's investigative findings letters issued under Sec.
13.51(c)(1) or the final sentence of Sec. 13.51(c)(2)(ii),
Administrator's rulings issued under Sec. 13.58, and from ALJ
decisions issued under Sec. 13.55. It further provided that in
considering the matters within its jurisdiction, the ARB would be the
Secretary's authorized representative and would act fully and finally
on behalf of the Secretary. Proposed Sec. 13.57(a)(2)(i) identified
the limitations on the ARB's scope of review, including a restriction
on passing on the validity of any provision of part 13 and a general
prohibition on receiving new evidence in the record, because the ARB is
an appellate body and must decide cases before it based on substantial
evidence in the existing record. Proposed Sec. 13.57(a)(2)(ii)
prohibited the ARB from granting attorney's fees or other litigation
expenses under the EAJA.
With respect to attorney's fees and costs under the EAJA, the
Department explained in the discussion of Sec. 13.55(d) above why it
is declining to adopt NELA's recommendation to add language to permit
the recovery of attorney's fees and costs by prevailing employees in
administrative proceedings brought pursuant to these regulations. The
Department received no other comments related to proposed Sec.
13.57(a) and is adopting it as proposed.
Proposed Sec. 13.57(b) required the ARB to issue a final decision
within a reasonable period of time following receipt of the petition
for review and to serve the decision by mail on all parties at their
last known address, and on the Chief ALJ, if the case involved an
appeal from an ALJ's decision. Proposed Sec. 13.57(c) directed the
ARB's order to mandate action to remedy a violation, including any
monetary or equitable relief described in Sec. 13.44, if the ARB
concludes a violation occurred. Under the proposed rule, if the
Administrator sought debarment, the ARB would determine whether a
debarment remedy is appropriate.
Finally, proposed Sec. 13.57(d) provided that the ARB's decision
would become the Secretary's final order in the matter. The Department
received no comments related to proposed Sec. 13.57 (b), (c), and (d)
and accordingly adopts them as proposed.
Section 13.58 Administrator Ruling
Proposed Sec. 13.58 set forth a procedure for addressing questions
regarding the application and interpretation of the rules contained in
part 13. Proposed Sec. 13.58(a), which the Department derived
primarily from the DBA's implementing regulations at 29 CFR 5.13,
provided that such questions could be referred to the Administrator. It
further provided that the Administrator would issue an appropriate
ruling or interpretation related to the question. Additionally, under
proposed Sec. 13.58(a), requests for rulings under this section must
be addressed to the Administrator, Wage and Hour Division, U.S.
Department of Labor, Washington, DC 20210.
Any interested party could, pursuant to proposed Sec. 13.58(b),
appeal a final ruling of the Administrator issued pursuant to proposed
Sec. 13.58(a) to the ARB within 30 calendar days of the date of the
ruling.
The Department received no comments related to proposed Sec. 13.58
and accordingly retains the section as proposed.
Appendix A (Contract Clause)
Because Executive Order 13706 requires inclusion of a contract
clause in covered contracts, the Department proposed the text of a
contract clause in appendix A to part 13. The Department is finalizing
the contract clause as appendix A to part 13 essentially as proposed.
Certain provisions of the proposed contract clause have been modified,
however, to reflect changes to relevant portions of part 13 as
promulgated by the Final Rule; these modifications are explained below.
As required by the Order, the contract clause specifies employees must
earn not less than 1 hour of paid sick leave for every 30 hours worked.
Consistent with the Secretary's authority to obtain compliance with the
Order, as well as the Secretary's responsibility to issue regulations
implementing the requirements of the Order that incorporate, to the
extent practicable, existing procedures, remedies, and enforcement
processes under the FLSA, SCA, DBA, FMLA, VAWA and Executive Order
13658, the additional provisions of the contract clause are based on
the statutory text or implementing regulations of these five statutes
and Executive Order 13658 and are intended to obtain compliance with
the Order.
The introduction to the contract clause provides that the clause
must be included by the contracting agency in all contracts, contract-
like instruments, and solicitations to which Executive Order 13706
applies, except for procurement contracts subject to the Federal
Acquisition Regulation (FAR). For procurement contracts subject to the
FAR, contracting agencies shall use the clause set forth in the FAR
developed to implement part 13. Such clause shall accomplish the same
purposes as the clause set forth in appendix A and shall be consistent
with the requirements set forth in the Secretary's regulations.
Paragraph (a) of the contract clause set forth in appendix A
provides that the contract in which the clause is included is subject
to Executive Order 13706, the regulations issued in part 13 to
implement the Order's requirements, and all the provisions of the
contract clause.
Paragraph (b) identifies the contractor's general paid sick leave
obligations. Paragraph (b)(1) stipulates that contractors must permit
each employee engaged in the performance of the contract by the prime
contractor or any subcontractor, regardless of any contractual
relationship that may be alleged to exist between the contractor and
the employee, to earn not less than 1 hour of paid sick leave for every
30 hours worked. It further provides that the contractor must allow
accrual and use of paid sick leave as required by the Executive Order
and part 13, particularly the accrual, use, and other requirements set
forth in Sec. Sec. 13.5 and 13.6, which are incorporated by reference
in the contract.
The first sentence of paragraph (b)(2), which reflects requirements
in proposed Sec. Sec. 13.23 and 13.24 and was derived from the
contract clauses applicable to contracts subject to the SCA, DBA and
Executive Order 13658, see 29 CFR 4.6(h) (SCA); 29 CFR 5.5(a)(1) (DBA);
79 CFR 60731 (Executive Order 13658), aims to ensure that employees
actually receive the full pay and benefits to which they are entitled
under the Executive Order and part 13 when they use paid sick leave. It
requires a contractor to provide paid sick leave to all employees when
due free and clear and without subsequent deduction (except as
otherwise provided by Sec. 13.24), rebate, or kickback on any account.
Paragraph (b)(2)'s second sentence clarifies that employees who have
used paid sick leave must receive the full pay and benefits to which
they are entitled for the period of leave used no later than one pay
period following the end of the regular pay period in which the
employee used the sick leave. This requirement appears in Sec. 13.27.
Paragraph (b)(3) provides that the prime contractor and any upper-
tier subcontractor shall be responsible for the compliance by any
subcontractor or lower-tier subcontractor with the requirements of
Executive Order 13706, part 13, and the contract clause. This
responsibility on the part of prime and upper-tier contractors for
subcontractor compliance parallels that of the SCA, DBA and Executive
Order 13658. See 29 CFR 4.114(b) (SCA); 29 CFR 5.5(a)(6)
[[Page 67668]]
(DBA); 29 CFR 10.21(b) (Executive Order 13658). It also appears in
Sec. 13.21(b).
Paragraphs (c) and (d) of the contract clause are derived primarily
from the contract clauses applicable to contracts subject to the SCA,
DBA, and Executive Order 13658. See 29 CFR 4.6(i) (SCA); 29 CFR
5.5(a)(2), (7) (DBA); 79 FR 60731 (Executive Order 13658). Paragraph
(c) provides that the contracting officer shall, upon its own action or
upon written request of an authorized representative of the Department
of Labor, withhold or cause to be withheld from the prime contractor
under the contract or any other Federal contract with the same prime
contractor, so much of the accrued payments or advances as may be
considered necessary to pay employees the full amount owed to
compensate for any violation of the requirements of Executive Order
13706, part 13, or the contract clause, including any pay and/or
benefits denied or lost by reason of its violation; other actual
monetary losses sustained as a direct result of the violation; and
liquidated damages. Consistent with withholding procedures under the
SCA, DBA, and Executive Order 13658, paragraph (c) allows the
contracting agency and the Department to effect withholding of funds
from the prime contractor on not only the contract covered by the
Executive Order but also on any other contract that the prime
contractor has entered into with the Federal Government.
Paragraph (d) states the circumstances under which the contracting
agency and/or the Department may suspend or terminate a contract, or
debar a contractor, for violations of the Executive Order. It provides
that in the event of a failure to comply with any term or condition of
the Executive Order, part 13, or the contract clause in appendix A, the
contracting agency may on its own action, or after authorization or by
direction of the Department and written notification to the contractor,
take action to cause suspension of any further payment, advance, or
guarantee of funds until such violations have ceased. Paragraph (d)
additionally provides that any failure to comply with the contract
clause may constitute grounds for termination of the right to proceed
with the contract work and, in such event, for the Federal Government
to enter into other contracts or arrangements for completion of the
work, charging the contractor in default with any additional cost; this
requirement operates as provided in Sec. 13.11(c). Paragraph (d) also
provides that a breach of the contract clauses may be grounds to debar
the contractor as provided in Sec. 13.52.
Paragraph (e), which implements section 2(f) of the Executive
Order, provides that the paid sick leave required by the Executive
Order, part 13, and the contract clause is in addition to a
contractor's obligations under the SCA and DBA, and that a contractor
may not receive credit toward its prevailing wage or fringe benefit
obligations under those Acts for any paid sick leave provided in
satisfaction of the requirements of the Executive Order and part 13.
Paragraph (f), which implements section 2(l) of the Executive
Order, provides that nothing in Executive Order 13706 or part 13 shall
excuse noncompliance with or supersede any applicable Federal or State
law, any applicable law or municipal ordinance, or a CBA requiring
greater paid sick leave or leave rights than those established under
Executive Order 13706 and part 13. Sections 13.5(f)(2)(i) and Sec.
13.5(f)(1) also implement sections 2(f) and 2(l) of the Executive
Order, respectively, and the preamble discussions related to Sec. Sec.
13.5(f)(2)(i) and 13.5(f)(1) accordingly describe the operation of
paragraphs (e) and (f) in greater detail.
Paragraph (g) sets forth recordkeeping and related obligations that
are consistent with the Secretary's authority under section 4 of the
Order to obtain compliance with the Order, and that the Department
views as essential to determining whether the contractor has satisfied
its obligations under the Executive Order. The Department derived the
obligations set forth in paragraph (g) from the FLSA, SCA, DBA, FMLA
and Executive Order 13658. The recordkeeping obligations in paragraph
(g) duplicate those in Sec. 13.25, and paragraph (g) has accordingly
been modified to reflect any changes to Sec. 13.25. Specifically,
paragraphs (xvi) and (xvii) have been added to section (1) to reflect
the addition of Sec. 13.25(16) and (17); paragraph (ii) has been added
to section (2) to reflect the addition of Sec. 13.25(b)(2); and
paragraphs (iii), (vi), (vii), and (x) have been edited to reflect
minor revisions made to the corresponding paragraphs of Sec. 13.25. A
full description of those obligations and changes appears in the
preamble related to Sec. 13.25.
Paragraph (h) requires the contractor to both insert the contract
clause in all its covered subcontracts and to require its
subcontractors to include the clause in any covered lower-tier
subcontracts.
Paragraph (i), which is derived from the SCA contract clause, 29
CFR 4.6(n), and the Executive Order 13658 contract clause, 79 FR 60731,
sets forth the certifications of eligibility the contractor makes by
entering into the contract. Paragraph (i)(1) stipulates that by
entering into the contract, the contractor and its officials certify
that neither the contractor nor any person or firm with an interest in
the contractor's firm is a person or firm ineligible to be awarded
Government contracts by virtue of the sanctions imposed pursuant to
section 5 of the SCA, section 3(a) of the DBA, or 29 CFR 5.12(a)(1).
Paragraph (i)(2) constitutes a certification that no part of the
contract shall be subcontracted to any person or firm on the list of
persons or firms ineligible to receive Federal contracts currently
maintained on the System for Award Management Web site, http://www.SAM.gov. Paragraph (i)(3) contains an acknowledgement by the
contractor that the penalty for making false statements is prescribed
in the U.S. Criminal Code at 18 U.S.C. 1001.
Paragraph (j) implements section 2(k) of the Executive Order. The
text of paragraph (j) mirrors the regulatory text at Sec. Sec. 13.6(a)
and 13.6(b); accordingly, paragraph (j) has been modified to reflect an
additional example of interference included in the regulatory text. A
full description of the operation of the proposed contractor
obligations not to interfere with or discriminate against employees
with respect to the accrual or use of paid sick leave accordingly
appears in the preamble related to Sec. Sec. 13.6(a) and 13.6(b).
Paragraph (k) provides that employees cannot waive, nor may
contractors induce employees to waive, their rights under Executive
Order 13706, part 13, or the contract clause. As discussed in greater
detail in the preamble related to Sec. 13.7, the Department included a
provision prohibiting the waiver of rights in the regulations
implementing the Minimum Wage Executive Order and believes it is
appropriate to adopt the same policy here.
Paragraph (l) requires that contractors notify all employees
performing work on or in connection with a covered contract of the paid
sick leave requirements of Executive Order 13706, part 13, and the
contract clause by posting a notice provided by the Department of Labor
in a prominent and accessible place at the worksite so it may be
readily seen by employees. It additionally permits contractors that
customarily post notices to employees electronically to post the notice
electronically, provided such electronic posting is displayed
prominently on any Web site that is maintained by the contractor,
whether external or internal, and is customarily used for notices to
[[Page 67669]]
employees about terms and conditions of employment. The notice
obligations contained in paragraph (l) mirror those contained in Sec.
13.26(a)-(b), which the Department derived from the Minimum Wage
Executive Order Final Rule at 29 CFR 10.29(b)-(c). The preamble related
to those sections contains a discussion of the Department's rationale
for including the particular notice obligation it has adopted.
Paragraph (m) is based on section 5(b) of the Executive Order and
provides that disputes related to the application of the Executive
Order to the contract shall not be subject to the contract's general
disputes clause. Instead, such disputes shall be resolved in accordance
with the dispute resolution process set forth in part 13. Paragraph (m)
also provides that disputes within the meaning of the contract clause
include disputes between the contractor (or any of its subcontractors)
and the contracting agency, the U.S. Department of Labor, or the
employees or their representatives.
III. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its attendant regulations, 5 CFR part 1320, requires that the
Department consider the impact of paperwork and other information
collections burdens imposed on the public. Under the PRA, an agency may
not collect or sponsor the collection of information, nor may it impose
an information collection requirement unless it displays a currently
valid Office of Management and Budget (OMB) control number. See 5 CFR
1320.8(b)(3)(vi). The OMB has assigned control number 1235-0018 to the
general recordkeeping provisions of various labor standards that the
WHD administers and enforces and control number 1235-0021 to the
information collection which gathers information from complainants
alleging violations of such labor standards. The OMB has assigned
control number 1235-0029 to the new information collection request
(ICR) that the Department has created to address any recordkeeping
requirements related to paid sick leave that may be new.
In accordance with the PRA, the Department solicited public
comments on the proposed changes to the existing information
collections and the new information collection in the NPRM, as
discussed below. See 81 FR 9592. The Department also submitted a
contemporaneous request for OMB review of the proposed revisions to the
information collections in accordance with 44 U.S.C. 3507(d). The
Department extended the period for filing comments on the PRA and
information collections only, to provide interested parties additional
time to submit comments. See 81 FR 19997. On April 28, 2016, the OMB
issued a notice that continued the previous approval of the information
collections under the existing terms of clearance and asked the
Department to resubmit the information collection requests upon
promulgation of the Final Rule and after consideration of public
comments received.
Circumstances Necessitating Collection: The Final Rule contains
provisions that are considered collections of information under the
PRA. Pursuant to Sec. 13.21, the contractor and any subcontractors
shall include in any covered subcontracts the applicable Executive
Order paid sick leave contract clause referred to in Sec. 13.11(a) and
shall require, as a condition of payment, that the subcontractor
include the contract clause in any lower-tier subcontracts. Pursuant to
Sec. 13.25, contractors and each subcontractor performing work subject
to Executive Order 13706 and these regulations shall make and maintain
during the course of the covered contract, and preserve for no less
than three years thereafter, records containing the information
specified in paragraphs (a)(1) through (17) of Sec. 13.25 for each
employee and shall make them available for inspection, copying, and
transcription by authorized representatives of the Wage and Hour
Division. These include: (1) Name, address, and Social Security number
of each employee; (2) The employee's occupation(s) or
classification(s); (3) The rate or rates of wages paid (including all
pay and benefits provided); (4) The number of daily and weekly hours
worked; (5) Any deductions made; (6) The total wages paid (including
all pay and benefits provided) each pay period; (7) A copy of
notifications to employees of the amount of paid sick leave the
employees have accrued as required under Sec. 13.5(a)(2); (8) A copy
of employees' requests to use paid sick leave, if in writing, or, if
not in writing, any other records reflecting such employee requests;
(9) Dates and amounts of paid sick leave used by employees; (10) A copy
of any written denials of employees' requests to use paid sick leave,
including explanations for such denials, as required under Sec.
13.5(d)(3); (11) Any records reflecting the certification and
documentation a contractor may require an employee to provide under
Sec. 13.5(e), including copies of any certification or documentation
provided by an employee; (12) Any other records showing any tracking of
or calculations related to an employee's accrual and/or use of paid
sick leave; (13) The relevant covered contract; (14) The regular pay
and benefits provided to an employee for each use of paid sick leave;
and (15) Any financial payment made for unused paid sick leave upon a
separation from employment intended, pursuant to Sec. 13.5(b)(5), to
relieve a contractor from the obligation to reinstate such paid sick
leave as otherwise required by Sec. 13.5(b)(4).
Additionally, under Sec. 13.25, if a contractor wishes to
distinguish between an employee's covered and non-covered work, the
contractor must keep records reflecting such distinctions.
The Department notes that some of the recordkeeping requirements
related to paid sick leave may be new requirements for some
contractors. As a result, the Department created a new information
collection, 1235-0NEW, titled ``Government Contractor Paid Sick Leave''
and submitted it to OMB for approval. On April 28, 2016, the OMB filed
a notice of action, assigning OMB control number 1235-0029 to the new
package, and asked that prior to publication of the Final Rule, the
Department provide OMB a summary of all comments received and identify
any changes made in the Final Rule in response to those comments. A new
information collection request (ICR) was submitted to the OMB that
would provide PRA authorization for control number 1235-0029 to
incorporate the recordkeeping provisions in this Final Rule and to
incorporate burdens associated with the new recordkeeping requirements.
Additionally, on, April 28, 2016, the OMB filed a notice of action
instructing the Department to continue the information collections
under the existing terms of clearance for ICR 1235-0018 and ICR 1235-
0021, and asked the Department to resubmit the information collection
requests upon promulgation of the Final Rule and after consideration of
public comments received. The Department will submit to OMB for
approval a revision to ICR 1235-0018 incorporating certain
recordkeeping provisions in this rule even though the Final Rule does
not increase a paperwork burden on the regulated community of the
information collection provisions contained in ICR 1235-0018. The ICR
under OMB control number 1235-0018 contains the general FLSA
recordkeeping requirements and burdens. The Final Rule does restate
recordkeeping requirements that are already required for other
purposes. The restated recordkeeping requirements are located in Sec.
13.25(a)(1)-(6) (including an
[[Page 67670]]
exemption located in Sec. 13.25(c)). Such burden is already captured
in the ICR for all employers; however, the Department believes
restating the requirements in one place will help employers,
particularly small entities, comply with this Final Rule by removing
the need to cross check other regulations.
The WHD obtains PRA clearance under control number 1235-0021 for an
information collection covering complaints alleging violations of
various labor standards that the agency administers and enforces. An
ICR has been submitted to revise the approval to incorporate the
provisions in the Final Rule applicable to complaints and adjust burden
estimates to reflect any increase in the number of complaints filed
against contractors who fail to comply with the paid sick leave
requirements of Executive Order 13706 and 29 CFR part 13.
Subpart E establishes administrative proceedings to resolve
investigation findings and imposes information collection requirements,
particularly with respect to hearings. However, the PRA's requirements
do not apply to a civil action in which a U.S. agency is a party, or to
an administrative action or investigation involving a U.S. agency. See
44 U.S.C. 3518(c)(1)(B); 5 CFR 1320.4(a)(2). Therefore, the Department
determined the collections of information required by subpart E of this
Final Rule are exempt from the PRA's requirements.
Information and technology: There is no particular order or form of
records prescribed by the Final Rule. A contractor may meet the
requirements of this Final Rule using paper or electronic means. The
WHD, in order to reduce burden caused by the filing of complaints that
are not actionable by the agency, uses a complaint filing process that
has complainants discuss their concerns with WHD professional staff.
This process allows agency staff to refer complainants raising concerns
that are not actionable under wage and hour laws and regulations to an
agency that may be able to offer assistance.
Public comments: The Department sought public comments on its
analysis that the NPRM created a slight paperwork burden associated
with ICR 1235-0021 but did not add to the paperwork burden on the
regulated community for the information collection provisions otherwise
previously approved in ICR 1235-0018. Additionally, the Department
sought comments on its analysis that the proposed rule created a new
paperwork burden on the regulated community as described in the new
information collection provisions contained in ICR 1235-0029. The
Department received some comments with respect to the paperwork. The
SEIU submitted a comment, with approximately 4,000 employee signatures,
voicing general support for the new reporting requirements established
by the NPRM and stating that Section 13.21 (which requires federal
contractors to include the Executive Order contract clause in all of
their federal contracts) ``guarantees that federal contractors and
subcontractors are familiar with the paid sick leave requirements and
that they will comply with these requirements `as a condition of
payment','' and that Section 13.25's recordkeeping requirements
``assist the agency with both preventing and detecting possible
instances of contractor fraud and inaccuracies.''
The Chamber commented that the Department's Paperwork Reduction Act
burden estimates provided in the NPRM were too low. They contended that
the Department's assertion that 322,067 workers will gain paid sick
leave rights during the first three years of implementation of the
proposed rule was an underestimate for the number of affected
employees. They suggested that a more reasonable estimate of the number
of affected workers would include the number of workers working for
concessionaires and lessees of space on Federal property, independent
contractors who are covered under the EO, subcontractor employees, and
employees who spend time working on non-Federal projects. As described
in more detail in the relevant sections, to address commenters'
concerns with respect to the number of affected employees, the
Department reviewed its methodology and revised its estimates by adding
concessioners and other contractors on Federal lands, lessees of space
on Federal property, and firms with operations on Federal bases to the
analysis of this Final Rule, which contributed to an increase in the
estimated number of affected employees. Also, using more recent data to
estimate the number of subcontractors led to the inclusion of 3,763
more subcontractors than in the NPRM. The Department notes that the OES
includes incorporated independent contractors, and thus those workers
are included in the analysis. Unincorporated independent contractors
continue to be excluded in this Final Rule as they are unlikely to be
covered by this Rule because, assuming they are bona fide independent
contractors, they are not covered by the FLSA and are unlikely to be
performing work on or in connection with SCA-covered, or DBA-covered
contracts. As further described below, the methodology represents
workers who are working exclusively and year-round on covered Federal
contracts, thus the number of workers who will gain benefits will
likely exceed this number. However, data are not available to estimate
the number of workers gaining benefits. Implications of this for costs
and transfers are discussed in the relevant sections.
The Chamber also expressed the view that the new recordkeeping
burden should be higher because the Department underestimated its
estimates of patterns of leave use; time values associated with
recordkeeping, creating a certified list, and providing leave balances;
and failed to account for the burden created for employers as a part of
regulatory familiarization. The Department agrees that the Executive
Order and the regulations will usually require employers subject to the
Order to track accrued leave and leave usage and to provide notice to
employees of the amount of accrued paid leave, and will allow employers
subject to the Order to obtain a certification under certain
circumstances. The Department has accordingly created a new information
collection requirement for employers subject to these new requirements.
The Department's estimates of time values related to these requirements
are based on its enforcement experience. The Department has added a new
section on regulatory familiarization to this ICR to address the
Chamber's concern.
An agency may not conduct an information collection unless it has a
currently valid OMB approval, and the Department submitted the
identified information collections contained in the proposed rule to
OMB for review in accordance with the PRA under Control numbers 1235-
0018, and 1235-0021. The Department submitted a new information
collection request in the proposed rule as 1235-0NEW, to which OMB
subsequently assigned control number 1235-0029. See 44 U.S.C. 3507(d);
5 CFR 1320.11. The Department has resubmitted the revised information
collections to OMB for approval, and the Department intends to publish
a notice announcing OMB's decision regarding this information
collection request. A copy of the information collection request can be
obtained at http://www.Reginfo.gov or by contacting the Wage and Hour
Division as shown in the FOR FURTHER INFORMATION CONTACT section of
this preamble.
[[Page 67671]]
Total burden for the recordkeeping and complaint process
information collections, including the burdens that will be unaffected
by this Final Rule and any changes are summarized as follows:
Type of Review: Revision to currently approved information
collections.
Agency: Wage and Hour Division, Department of Labor.
Title: Records to be Kept by Employers--Fair Labor Standards Act.
OMB Control Number: 1235-0018.
Affected Public: Private sector businesses or other for-profits,
farms, not-for-profit institutions, state, local and tribal
governments, and individuals or households.
Estimated Number of Respondents: 5,511,960 (unaffected by this
rulemaking).
Estimated Number of Responses: 46,057,855 (unaffected by this
rulemaking).
Estimated Burden Hours: 3,489,585 (unaffected by this rulemaking).
Estimated Time per Response: Various (unaffected by this
rulemaking).
Frequency: Various (unaffected by this rulemaking).
Other Burden Cost: 0.
Title: Employment Information Form.
OMB Control Number: 1235-0021.
Affected Public: Businesses or other for-profit, not-for-profit
institutions, state and local governments, and individuals or
households.
Total Respondents: 37,594 (227 from this rulemaking).
Estimated Number of Responses: 37,594 (227 from this rulemaking).
Estimated Burden Hours: 12,532 (76 from this rulemaking).
Estimated Time per Response: 20 minutes (unaffected by this
rulemaking).
Frequency: once.
Other Burden Cost: 0.
Type of Review: Approval of New Information Collection.
Agency: Wage and Hour Division, Department of Labor.
Title: Government Contractor Paid Sick Leave.
OMB Control Number: 1235-0029.
Affected Public: Businesses or other for-profit, farms, not-for-
profit institutions, state, local and tribal governments, and
individuals or households.
Total Respondents: 617,200.
Estimated Number of Responses: 13,577,407.
Estimated Burden Hours: 590,478.
Estimated Time per Response: various.
Frequency: on occasion.
Other Burden Cost: $347,784 (maintenance and operations).
IV. Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of an intended regulation and to propose or adopt a
regulation only upon a reasoned determination that the intended
regulation's net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity)
justify its costs. Executive Order 13563 emphasizes the importance of
quantifying both costs and benefits where possible, reducing costs,
harmonizing rules, and promoting flexibility.
Under Executive Order 12866, it must be identified whether a
regulatory action is significant and therefore subject to the
requirements of the Executive Order and to review by OMB. 58 FR 51735.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule
that: (1) Has an annual effect on the economy of $100 million or more,
or adversely affects in a material way a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or tribal governments or communities (also
referred to as economically significant); (2) creates serious
inconsistency or otherwise interferes with an action taken or planned
by another agency; (3) materially alters the budgetary impacts of
entitlement grants, user fees, or loan programs, or the rights and
obligations of recipients thereof; or (4) raises novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in Executive Order 12866. Id.
The Office of Management and Budget has determined that this Final
Rule is a ``significant regulatory action'' under section 3(f) of
Executive Order 12866 because it is economically significant based on
the analysis set forth below. As a result, the Department has prepared
a Final Regulatory Impact Analysis (FRIA) as required under section
6(a)(3) of Executive Order 12866, and OMB has reviewed the Final Rule.
A. Introduction
i. Background and Need for Rulemaking
Executive Order 13706 (EO) provides that employees can earn up to
seven days of paid sick leave annually on specified categories of
contracts with the Federal Government where either the solicitation has
been issued, or the contract has been awarded outside the solicitation
process, on or after January 1, 2017. The Executive Order states that
the Federal Government's procurement interests in economy and
efficiency are promoted when the Federal Government contracts with
sources that allow their employees to earn paid sick leave.\2\ This
rulemaking implements the Executive Order, consistent with the
authorization in section 3 of the Order.
---------------------------------------------------------------------------
\2\ The phrase ``economy and efficiency'' is used here only in
the sense implied by the Federal Property and Administrative
Services Act.
---------------------------------------------------------------------------
ii. Summary of Affected Employees, Costs, Benefits, and Transfers
The Department estimated the number of employees who would, as a
result of the Executive Order and this Final Rule, receive some
additional amount of paid sick leave, i.e., ``affected employees.''
There are two categories of affected employees: Those covered employees
who currently receive no paid sick leave, and those covered employees
who currently receive paid sick leave in an amount less than they would
be entitled to receive under the Executive Order (up to 7 days
annually). As discussed in detail below, because the Final Rule only
applies to ``new contracts,'' and the Department has assumed it will
take five years for the universe of possibly covered contracts to
become ``new,'' the full impact of the rulemaking will not likely occur
before Year 5. In Year 5, the Department estimates there will be 1.2
million affected employees (Table 1).3 4 This includes
approximately 593,800 employees who currently receive no paid sick
leave and 556,800 employees who receive some paid sick leave but would
be entitled to receive additional paid sick leave under the Final Rule
(Table 8).
---------------------------------------------------------------------------
\3\ This includes projected net job growth and so is somewhat
larger than five times the number of affected employees in Year 1.
Net job growth takes into account both workers entering and leaving
Federal government contracting.
\4\ The estimates of affected employees represent the number of
full-year employees working exclusively on covered contracts.
---------------------------------------------------------------------------
The Department also estimated costs and transfer payments
associated with this rulemaking. During the first 10 years the rule is
in effect, average annualized direct employer costs are estimated to be
$27.3 million (Table 1). (This estimation assumes a 7 percent real
discount rate; hereafter, unless otherwise specified, average
annualized values will be presented using a 7 percent real discount
rate.) This estimated annualized cost includes $10.7 million for
regulatory familiarization, $4.9 million for initial implementation
costs, $3.7 million for recurring implementation costs, and $8.0
million for administrative costs. For a discussion of how the
Department
[[Page 67672]]
estimated these numbers, please see section V.C.ii.
Transfer payments are transfers of income from employers to
employees. Estimated average annualized transfer payments are $349.6
million per year over 10 years. Some of these payments may be in terms
of increased time away from work rather than increased income if
workers take more days of sick leave after the Rulemaking. We refer to
all such gains as transfers.
Lastly, the Department estimated deadweight loss (DWL). DWL occurs
when a market operates at less than optimal equilibrium output, which
happens anytime the conditions for a perfectly competitive market are
not met, including but not limited to a labor market intervention. The
Department estimated that average annualized DWL will be $734,000 per
year during the first ten years of the rule. This will be primarily due
to a possible small decrease in employment that may be a consequence of
the Final Rule. This DWL analysis assumes the market is currently in
equilibrium.
There will be many benefits associated with this rule. However, due
to data limitations, these benefits are not monetized. The following
benefits are a subset of those discussed qualitatively: Improved
employee health, improved health of dependents, increased productivity,
reduced hiring costs, decreased healthcare expenditures, and job
growth.
Table 1--Summary of Affected Employees, Regulatory Costs, and Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Future years (1,000s) Average annualized value
Year 1 ------------------------------------------------ (1,000s)
(1,000s) -------------------------------
Year 2 Year 5 Year 10 3% Real rate 7% Real rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Affected employees...................................... 222.1 454.0 1,150.6 1,203.7 .............. ..............
Direct employer costs (2015$)........................... $125,044 $10,541 $16,936 $11,034 $25,027 $27,255
Regulatory familiarization.......................... 80,427 0 0 0 9,154 10,702
Initial implementation.............................. 36,475 0 0 0 4,151 4,853
Recurring implementation............................ 6,107 6,379 6,389 0 3,396 3,690
Administrative...................................... 2,036 4,162 10,548 11,034 8,326 8,010
Transfers (2015$)....................................... 85,508 176,226 456,686 496,765 364,112 349,629
DWL (2015$)............................................. 183 376 963 1,028 764 734
--------------------------------------------------------------------------------------------------------------------------------------------------------
iii. Terminology and Abbreviations
The following terminology and abbreviations will be used throughout
this Regulatory Impact Analysis (RIA).
ATUS: American Time Use Survey.
BLM: Bureau of Land Management.
BLS: Bureau of Labor Statistics.
CPI-U: Consumer Price Index for all urban consumers.
CPS: Current Population Survey.
CUA: Commercial Use Authorization.
DBA: Davis-Bacon Act.
DWL: Deadweight loss. This is the loss of economic efficiency
that can occur when the market equilibrium for a good or service is
not achieved.
ECEC: Employer Costs for Employee Compensation.
FPDS-NG: Federal Procurement Data System-Next Generation.
FS: U.S. Forest Service.
FY: Fiscal year. The Federal fiscal year, used in this analysis,
is from October 1 through September 30.
GSA: General Services Administration.
NCS: National Compensation Survey.
NHIS: National Health Interview Survey.
NPS: National Park Service.
OES: Occupational Employment Statistics.
PTO: Paid time-off.
Price elasticity of labor demand (with respect to wage): The
percentage change in labor hours demanded in response to a one
percent increase in wages.
Price elasticity of labor supply (with respect to wage): The
percentage change in labor hours supplied in response to a one
percent increase in wages.
Real dollars (2015$): Dollars adjusted using the CPI-U to
reflect their purchasing power in 2015.
RIA: Regulatory Impact Analysis. This will be used to reference
the analysis conducted to assess the impact of this regulation.
SAM: System for Award Management.
SBA Advocacy: Office of Advocacy of the U.S. Small Business
Administration.
SUSB: Survey of United States Businesses.
Walsh-Healey PCA: The Walsh-Healey Public Contracts Act.
B. Methodology to Determine the Number of Affected Employees and Firms
i. Overview and Data
This section explains the Department's methodology to estimate the
number of affected employees and firms. The number of firms is
estimated primarily from the General Services Administration's (GSA)
System for Award Management (SAM). This is supplemented with a variety
of other sources including data from the NPS, the BLM, the FS and SBA
Advocacy. There are no data on the number of employees working on
Federal contracts (``Federal contract employees''); therefore, to
estimate the number of Federal contract employees, the Department
employed the approach used in the Minimum Wage Executive Order Final
Rule.\5\ This approach uses data from USASpending.gov, a database of
government contracts from the Federal Procurement Data System-Next
Generation (FPDS-NG).
---------------------------------------------------------------------------
\5\ See 79 FR 60634, 60692-60720.
---------------------------------------------------------------------------
After determining the total number of Federal contract employees,
the Department estimated the share who will receive additional days of
paid sick leave due to the rulemaking. The 2015 National Compensation
Survey (NCS) provides data on the percentage of employees with paid
sick leave and categorical ranges of the annual number of days of leave
that employees receive. This distribution allowed the Department to
estimate the number of employees who receive less than the amount of
paid sick leave required under the Final Rule. The 2015 NCS does not
provide data for the agriculture industry. Therefore, the Department
supplemented the 2015 NCS data on paid sick leave with data from the
2011 ATUS Leave Module.
ii. Number of Affected Firms
Commenters asserted that the Department underestimated the number
of firms affected by the rulemaking for several reasons. In response to
these comments, the Department reviewed its methodology for estimating
the number of affected firms and revised its estimates by excluding
firms that are only applying for grants, and adding entities likely
operating under covered nonprocurement contracts, specifically
nonprocurement contracts on Federal lands, firms with leases in
Federally owned properties, and firms with operations on Federal bases
to the analysis. These revisions are described below with a discussion
of commenters' concerns.
[[Page 67673]]
The main data source used to estimate the number of affected firms
is SAM. SAM reports all entities registered in the database, which is a
requirement to bid for Federal procurement contracts or grants. Firms
report a 6-digit primary NAICS code as part of their SAM registration.
NAICS codes were not reported by 20 companies; for these firms NAICS
codes are assigned based on the proportion of firms in each industry.
In the NPRM we used SAM data to estimate that 543,851 firms might
be affected by the rulemaking. See 81 FR 9641. However, this estimate
included firms whose sole contractual arrangement with the Federal
Government was that they were applying for grants. These firms will not
be affected by the rulemaking, and therefore, we have eliminated them
from the analysis. The Department updated its estimate by downloading
August 2015 SAM data and removing from the analysis firms only
receiving grants. After this adjustment we found 415,310 registered
firms.6 7 This is a reduction of 128,541 firms relative to
the NPRM.
---------------------------------------------------------------------------
\6\ Data released in monthly files. Available at: https://www.sam.gov/portal/SAM/#1.
\7\ Entities registering in SAM are asked if they wish to bid on
contracts. If a non-Federal entity answers ``Yes'' to this question,
SAM marks the registration as being ``All Awards.'' This is the
``Purpose of Registration'' column in the SAM data. The Department
included only firms with a value of ``Z2,'' which denotes ``All
Awards.'' See Section 3.2: Determining your Purpose of Registration
in the System for Award Management User Guide available at: https://test.sam.gov/sam/SAM_Guide/SAM_User_Gude.htm#_Toc330768975.
---------------------------------------------------------------------------
SAM includes all prime contractors and some subcontractors (those
who are also prime contractors or who have otherwise registered in
SAM). However, we are unable to determine the number of subcontractors
who are not in the SAM database. Therefore, for the NPRM the Department
examined five years of USASpending data \8\ and found 20,589
subcontractors who did not hold contracts as primes (and thus may not
be included in SAM), and added these firms to the total from SAM. The
Department used the number of unique subcontractors over five years to
adjust for USASpending not including lower tiers of subcontractors. No
commenters provided data or suggestions for methodological
improvements, so we continue to use this methodology in this Final
Rule. Applying this method to the most recent five years of data,
FY2011 through FY2015, the Department found 24,352 subcontractors who
do not hold contracts as primes and added these firms to the 415,310
firms not registered in SAM solely for the purpose of receiving grants
in this Final Rule (Table 2).
---------------------------------------------------------------------------
\8\ The Department identified subawardees from the
USASpending.gov data who did not perform work as a prime during
those years. The Department included subcontractors from five years
of data to compensate for lower-tier subcontractors that may not be
included in USASpending.gov. The Department believes this is a
reasonable approximation of the number of subcontractors, and
received no comments providing a better method. The USASpending data
are discussed in more detail in the section on ``Number of
Potentially Affected Employees.''
---------------------------------------------------------------------------
Commenters such as the Chamber/IFA and the SBA Advocacy noted the
Department did not account for nonprocurement concessions contracts and
nonprocurement contracts entered into with the Federal Government in
connection with Federal property or lands and related to offering
services for Federal employees, their dependents, or the general
public. In response to these comments, the Department has included
49,757 additional firms in the Final Rule. Estimating the number of
entities operating under covered nonprocurement contracts on Federal
property or lands involved many data sources and assumptions as
described below.\9\
---------------------------------------------------------------------------
\9\ Those estimates primarily capture those covered contracts
for concessions and contracts in connection with Federal property or
lands and relating to services for Federal employees, their
dependents, or the general public that are nonprocurement in nature,
such that the contracting entities are not necessarily listed in
SAM. However, the estimates will additionally capture some SCA-
covered contracts because SCA-covered contracts, contracts for
concessions and contracts in connection with Federal property or
lands are to some degree overlapping categories of contracts (e.g.,
at least some concessions contracts and contracts in connection with
Federal property or lands are covered by the SCA, see, e.g., Cradle
of Forestry in America Interpretive Association, ARB Case No. 99-
035, 2001 WL 328132 (ARB March 30, 2001)).
---------------------------------------------------------------------------
First, the Department estimated the number of contractors with
National Park Service (NPS) concessions contracts. The NPS Web site
contains a list of entities operating under concessions contracts on
NPS lands.\10\ The Department downloaded all 473 records contained on
the Web site, identified unique firms by name, and assigned them to
industries based on the first service provided listed. This results in
418 entities operating under concessions contracts on NPS lands.
Second, the Department estimated the number of NPS Commercial Use
Authorizations (CUAs). The Department informally consulted with the NPS
and learned that the NPS has approximately 5,900 FY2015 CUAs. The
Department understands that a NPS CUA is a written authorization to
provide services to park area visitors. See 36 CFR 18.2(c). Because
this definition may render NPS CUAs contracts with the Federal
Government in connection with Federal property or lands and related to
offering services to the general public and/or SCA-covered contracts,
the Department has assumed, solely for purposes of the economic
analysis, that all NPS CUAs are contracts covered by the Executive
Order. Because the number of CUAs does not take into account that one
firm may hold multiple authorizations, we multiplied the total number
of CUAs by the ratio of unique firms holding NPS concessions contracts
to total NPS concessions contracts to estimate the number of
contractors with CUAs (418 divided by 473 = 88 percent) for an
estimated 5,190 unique firms with CUAs from NPS. We also used the
industry distribution from NPS concessions contracts to assign CUA
permit holders to industries because industry information was not
directly available.
---------------------------------------------------------------------------
\10\ Available at: http://www.concessions.nps.gov/authorized_concessions.htm. The Department has assumed all NPS
concessions contracts are covered by the EO, solely for purposes of
this economic analysis, primarily because the EO itself specifically
covers concessions contracts.
---------------------------------------------------------------------------
Next, we estimated the number of U.S. Forest Service special use
authorizations. The Department informally consulted the FS, which
informed the Department that 77,353 special use authorizations (SUAs)
were in effect in fiscal year 2015. Based on further informal
consultations with the FS, the Department estimates that approximately
36 percent of these SUAs may be covered contracts. No data are
available to determine whether a contractor holds more than one permit;
therefore, we used the NPS ratio of unique concessions contract holders
to total concessions contract holders to estimate the number of unique
contractors with FS permits (88 percent). This leaves 24,370 unique
firms that may be affected. The Department combined its own assumptions
with information from the U.S. Census Bureau on the NAICS
classification when determining the relevant industry for each type of
permit because data were not available.
We also estimated the number of affected NPS special use permits.
During informal discussions with DOL, NPS officials estimated it issued
33,700 special use permits in FY 2015.\11\ It is likely that many, if
not most, of these permits will not be covered by the
[[Page 67674]]
rulemaking, but the Department has no method for directly determining
the number of such permits that might be covered. Therefore the
Department assumed, solely for purposes of the economic analysis, that
the EO would cover 36 percent of NPS special use permits using the FS
data for SUAs, and that 88 percent of the permits are held by unique
contract holders based on NPS data for CUAs. Therefore, the Department
estimates that 10,600 entities holding special use permits will be
covered by the rule. We assigned these permit holders to the ``arts,
entertainment, and recreation'' industry.
---------------------------------------------------------------------------
\11\ According to the NPS, activities that may require a special
use permit ``include (but are not limited to) weddings, [F]irst
[A]mendment demonstration activities, a bike race, fishing
tournament, group activities (groups of 20 or more participants).
See https://www.nps.gov/ever/learn/management/specialuse.htm.
---------------------------------------------------------------------------
Next, we estimated the number of U.S. Bureau of Land Management
(BLM) special recreation permits. BLM reports 4,004 of these permits in
FY2014.\12\ The Department again relied on the FS data to assume that
36 percent of these permits will be covered, and that 88 percent will
be held by unique contractors.\13\ This results in 1,261 entities
holding BLM special recreation permits. We assumed that these are in
the ``arts, entertainment, and recreation'' industry. These estimates
for the NPS, FS, and BLM do not account for the possibility that the
same firms may hold concessions contracts with more than one group.
---------------------------------------------------------------------------
\12\ U.S. Department of the Interior, Bureau of Land Management.
(2015). Public Land Statistics 2014. Available at: http://www.blm.gov/public_land_statistics/pls14/pls2014.pdf.
\13\ The Department believes it is reasonable to apply the 36%
coverage estimates to NPS special use permits and BLM special
recreation permits because it understands that these permits are
likely for sufficiently similar purposes and entered into with
sufficiently similar individuals and entities as the FS SUAs.
---------------------------------------------------------------------------
SBA Advocacy provided estimates of retail and concession leases in
federally-owned buildings. SBA Advocacy cites the GSA as the source for
732 retail leases and ``hundreds of other businesses that have
concessions contracts'' in Federally-owned buildings. We were unable to
confirm these numbers. We interpreted ``hundreds'' to be 500 and thus
included a total of 1,232 entities. SBA also suggested that the NPRM's
estimate of affected firms did not include visually-impaired
contractors that lease space at federal building to operate vending
facilities under the Randolph-Sheppard Act. The Department understands
that approximately 2,108 such leases may have existed in fiscal year
2014.\14\ The Department has accordingly added 2,108 firms to its
estimate, but notes that some of these firms may already be counted in
the GSA estimate. We assume these entities are in the ``retail trade''
and ``accommodation and food services'' industries.
---------------------------------------------------------------------------
\14\ http://www2.ed.gov/programs/rsarsp/index.html.
---------------------------------------------------------------------------
SBA Advocacy also provided estimates of operations and concessions
on military bases. SBA Advocacy cites a phone call between Advocacy and
the Army and Air Force Exchange Service to report 1,200 direct
operations and 462 concessions operating on federal bases. The
Department was unable to independently confirm these numbers.\15\ The
Navy, the Marine Corps, and the Coast Guard also have bases with retail
and concessions contracts. The Department determined there are 523 Navy
Exchanges,\16\ 2,250 Marine Corps Exchanges,\17\ and 114 \18\ Coast
Guard Exchanges. Based on general information about services on bases,
we assume these entities are in the ``retail trade'' and
``accommodation and food services'' industries. We further assume that
these entities, which appear to be providing nonprocurement services,
are not listed in SAM.
---------------------------------------------------------------------------
\15\ The Department did identify one source of data. Available
at: http://www.aafes.com/Images/AboutExchange/factsheet.pdf.
\16\ Navy Exchange data from Navy Exchange's Annual Report 2014.
Available at: https://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR14.pdf.
\17\ Marine Corps Exchanges Community Services. Available at:
http://www.usmcmccs.org/about/.
\18\ Coast Guard's Community Services Command. Available at:
http://www.uscg.mil/csc/.
---------------------------------------------------------------------------
In conclusion, the Department added some firms to the pool of
affected business entities, but eliminated others. The Department added
49,757 firms operating under contracts on federal lands or with leases
in federal buildings or bases, based on our assumption that these were
nonprocurement contractors not registered in SAM that might be covered
by the Executive Order. Using more recent data to estimate the number
of subcontractors led to the inclusion of 3,763 more subcontractors
than in the NPRM. We also eliminated 128,541 firms that only receive
federal grants mentioned above. In total, these revisions and updates
reduced the number of firms by 75,021 (49,757 + 3,763-128,541). This
Final Rule accordingly estimates 489,419 potentially affected firms.
Table 2 summarizes the estimated number of affected contractors by
contract nexus and industry used in this rulemaking.
Table 2--Number of Potentially Affected Contractors
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NPS
Total Firms special Forest BLM Public
Industry potentially from SAM Subcontractors NPS NPS CUAs use service special buildings Federal
affected \a\ \b\ concessions \c\ permits SUAs \e\ recreation \f\ bases \g\
firms \d\ permits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing..................................... 8,525 8,428 13 0 0 0 84 0 0 0
Mining............................................................. 1,668 1,594 11 0 0 0 63 0 0 0
Utilities.......................................................... 5,641 3,171 61 0 0 0 2,409 0 0 0
Construction....................................................... 61,399 52,410 8,770 0 0 0 219 0 0 0
Manufacturing...................................................... 69,513 65,119 4,364 0 0 0 30 0 0 0
Wholesale trade.................................................... 28,626 28,157 469 0 0 0 0 0 0 0
Retail trade....................................................... 17,682 12,446 52 73 906 0 34 0 1,670 2,501
Transportation and warehousing..................................... 17,780 11,881 93 153 1,900 0 3,754 0 0 0
Information........................................................ 19,511 13,583 235 0 0 0 5,693 0 0 0
Finance and insurance.............................................. 2,712 2,682 30 0 0 0 0 0 0 0
Real estate and rental and leasing................................. 20,705 20,699 6 0 0 0 0 0 0 0
Professional, scientific, and...................................... 101,538 93,481 7,562 0 0 0 496 0 0 0
Management of companies............................................ 264 264 0 0 0 0 0 0 0 0
Administrative and waste services.................................. 33,374 30,375 2,086 50 621 0 241 0 0 0
Educational services............................................... 13,645 13,130 446 0 0 0 69 0 0 0
Health care and social assistance.................................. 27,314 27,246 39 2 25 0 2 0 0 0
Arts, entertainment, and recreation................................ 26,922 4,063 1 78 968 10,628 9,922 1,261 0 0
[[Page 67675]]
Accommodation and food services.................................... 14,524 8,902 1 58 720 0 1,124 0 1,670 2,048
Other services..................................................... 18,077 17,679 113 4 50 0 232 0 0 0
----------------------------------------------------------------------------------------------------------------------------
Total private.................................................. 489,419 415,310 24,352 418 5,190 10,628 24,370 1,261 3,340 4,549
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ GSA's System for Award Management (SAM) for August 2015.
\b\ USASpending.gov FY2011-FY2015.
\c\ Total CUAs from NPS, adjusted for firms holding more than one permit using the ratio from NPS concessions.
\d\ Total SUAs from NPS. Assumed same proportion as the FS SUAs are covered and the same proportion as NPS concessions are unique.
\e\ Forest Service provided a count of permits at the end of FY2015. Use ratio of unique firms to all firms from NPS concessions.
\f\ Retail and concession leases in public buildings. Provided by SBA Advocacy and U.S. Department of Education.
\g\ Direct operations and concessions on federal bases. Army and Air Force Exchange Service (AAFES) firms provided by SBA Advocacy. Navy Exchange data from Navy Exchange's Annual Report 2014.
Marine Corps Exchange data from Marine Corp Community Services. Coast Guard Exchange data from Coast Guard's Community Services Command.
The Chamber/IFA also argued that the Department's analysis in the
NPRM is internally inconsistent because we estimated 1.2 million
potentially affected employees and 543,900 potentially affected
contractors, which results in an average of 2.1 potentially affected
employees per contracting firm. The Department believes this perceived
inconsistency is the result of inappropriately dividing the number of
potentially affected employees by 543,900. There are three primary
reasons why the 543,900 figure is not the appropriate denominator when
calculating the average number of employees per contracting firm.
First, as explained in the NPRM, 81 FR 9641, the estimated number
of potentially affected contractors includes those that only work on
Walsh-Healey Public Contracts Act (PCA) contracts, which will not be
affected by the rulemaking, and whose employees thus have been excluded
from the estimate of affected employees. These contractors remain in
the estimate of affected contractors in the Final Rule because the
Department believes they may accrue some limited regulatory
familiarization costs to determine that they are not impacted by the
Final Rule. However, these contractors will not have affected
employees.
Second, as also explained in the NPRM, 81 FR 9641, some firms
listed in the SAM database may not currently hold government contracts
but are enrolled in SAM because they have held government contracts in
the past or are interested in applying for contracts. These firms were
kept in the analysis because some may bid on and be awarded future
contracts. However, since others will not, affected workers should not
be distributed to those firms (i.e., some of these firms will not have
affected employees). Third, the NPRM analysis included firms listed in
the SAM database that only hold, or wish to hold, government grants.
Firms applying only for grants were eliminated from the estimated
number of affected firms in this Final Rule because they will not
accrue any costs.
When preparing the analysis of the proposed rule, the Department
had not identified an appropriate method to eliminate contracting firms
with contracts only on Walsh-Healey PCA contracts or without Federal
contracts to estimate the number of contracting firms with affected
employees. For this Final Rule, the Department has identified a
methodology to estimate the number of contractors with potentially
affected employees.\19\ This methodology counts only contractors with
service (including construction) contracts in USASpending in FY2015
because these are the procurement contractors with potentially affected
employees, and adds entities operating under covered nonprocurement
contracts on Federal property or lands. We estimate there are 165,987
such contractors (91,878 prime contractors in USASpending, 24,352
subcontractors, and 49,757 entities with contracts on Federal property
or lands). If this is used as the denominator, which we think would be
reasonable, then we estimate an average of 10.4 full-year employees
working exclusively on covered contracts per contracting firm. It is
important to note, however, that this is not an estimate of the average
number of total employees at these potentially affected contracting
firms since only a segment of a contracting firm's workforce may work
on covered Federal contracts.
---------------------------------------------------------------------------
\19\ This methodology plus one additional step is used in the
FRFA to estimate the number of small contractors with affected
employees because these contractors are a subset of the contractors
with potentially affected employees.
---------------------------------------------------------------------------
iii. Number of Potentially Affected Employees
There are no data on the number of employees working on Federal
contracts; therefore, to estimate the number of Federal contract
employees, the Department employed the approach used in the Minimum
Wage Executive Order Final Rule.\20\ The Department estimated the
number of employees who work on federal contracts that will be covered
by the Executive Order, representing the number of ``potentially
affected employees.'' Additionally, the Department estimated the share
of potentially affected employees who will receive new or additional
paid sick leave as a result of the Executive Order. These employees are
referred to as ``affected.'' \21\
---------------------------------------------------------------------------
\20\ See 79 FR 60634, 60692-60720.
\21\ Some workers with seven days of paid sick leave may still
be affected if the Executive Order entitles them to use paid sick
leave for additional purposes. However, data are not available to
estimate these workers.
---------------------------------------------------------------------------
The Department estimated the number of potentially affected
employees in two parts. First, we estimated employees working on SCA
and DBA procurement contracts. Second, we estimated the number of
potentially affected employees on nonprocurement concessions contracts
and contracts on Federal property or lands (some of which would also be
SCA-covered). SCA and DBA contract employees on covered procurement
contracts were estimated by taking the ratio of Federal contracting
expenditures (``Exp'') to total output (Y), by industry. Total output
is the market value of the goods and services produced by an industry.
This ratio is then applied to total private employment in that industry
(``Emp'')
[[Page 67676]]
(Table 3). This analysis was conducted at the 2-digit NAICS level.\22\
---------------------------------------------------------------------------
\22\ The North American Industry Classification System is a
method by which Federal statistical agencies classify business
establishments in order to collect, analyze, and publish data about
certain industries. Each industry is categorized by a sequence of
codes ranging from 2 digits (most aggregated level) to 6 digits
(most granular level). United States Census Bureau. ``North American
Industry Classification System: Introduction to NAICS.'' U.S.
Department of Commerce. Available at: http://www.census.gov/eos/www/naics/.
[GRAPHIC] [TIFF OMITTED] TR30SE16.003
The Department used total Federal contracting expenditures from
USASpending.gov data, which tabulates data on Federal contracting
through the Federal Procurement Data System--Next Generation (FPDS-NG).
The Congressional Budget Office (CBO) has stated that this is the
``only comprehensive source of information about federal spending on
contracts.'' \23\ According to data from USASpending.gov, the
government spent $555 billion on procurement contracts in FY2015. The
Department excluded expenditures to state and local governments because
government employees generally receive at least seven days of paid sick
leave and because the DBA does not apply to construction performed by
state or local government employees. The Department also excluded
contracts performed outside the U.S. because the Final Rule only covers
contracts to the extent they are performed in the U.S. These two
adjustments reduce the relevant Federal government's expenditures to
$508 billion. Next, the Department excluded expenditures on goods
purchased by the Federal government because the Final Rule does not
apply to contracts subject to the Walsh-Healey PCA and hence would not
apply to contracts for the manufacturing and furnishing of materials
and supplies.\24\ Contracts for goods were identified in the
USASpending.gov data if the product or service code begins with a
number (services begin with a letter). Subtracting Federal expenditures
on goods purchased, the Department found that the Federal government
spent $286.4 billion on services (including construction) provided by
government contractors in FY2015.
---------------------------------------------------------------------------
\23\ Congressional Budget Office. (2015). Federal Contracts and
the Contracted Workforce. p. 3. Available at: https://www.cbo.gov/publication/49931.
\24\ For example, the government purchases pencils; however, a
contract solely to purchase pencils (whether covered by the Walsh-
Healey PCA or not) would not be covered by the Executive Order.
---------------------------------------------------------------------------
To determine the share of all output associated with government
contracts the Department divided industry-level contracting
expenditures by that industry's gross output.\25\ For example, in the
information industry, $8.1 billion in contracting expenditures was
divided by $1.6 trillion in total output, resulting in an estimate that
covered government contracts comprise 0.52 percent of every dollar of
total output in the information industry. The Department then
multiplied the ratio of covered-to-gross output by private sector
employment to estimate the share of employees working on covered
contracts for each 2-digit NAICS industry. Private sector employment is
from the 2015 Occupational Employment Statistics (OES).\26\ To
demonstrate, in the information industry, there were approximately 2.7
million private sector employees in May 2015 and covered government
contracts comprise 0.52 percent of every dollar of total output. The
Department multiplied 2.7 million by 0.52 percent to estimate that
14,000 employees on covered procurement contracts in the information
industry will be potentially affected by the Executive Order.\27\
---------------------------------------------------------------------------
\25\ Bureau of Economic Analysis, National Income and Product
Accounts (NIPA) Tables, Gross Output. 2015. ``Gross output of an
industry is the market value of the goods and services produced by
an industry, including commodity taxes. The components of gross
output include sales or receipts and other operating income,
commodity taxes, plus inventory change. Gross output differs from
value added, which measures the contribution of the industry's labor
and capital to its gross output.''
\26\ Bureau of Labor Statistics. Occupational Employment
Statistics. May 2015. Available at: http://www.bls.gov/oes/.
\27\ Note that number of employees aggregated across industry
analysis does not match the total number of employees derived using
totals due to the order of multiplying and summing.
---------------------------------------------------------------------------
Commenters claimed that independent contractors are not represented
in these data. For example, the Chamber/IFA wrote ``the Department's
analysis fails to account for independent contractors who will be
treated as equivalent employees under the proposal.'' The Department
notes that the OES includes incorporated independent contractors, and
thus such independent contractors are included in the analysis.
Unincorporated independent contractors are unlikely to be covered by
this rule because, assuming they are bona fide independent contractors,
they are not covered by the FLSA, and are unlikely to be performing
work on or in connection with SCA- or DBA-covered contracts. Thus, they
continue to be excluded in the Final Rule.
This Final Rule makes clear that contract workers with the U.S.
Postal Service are covered by this rulemaking. These workers are
included in the OES employment data for the transportation and
warehousing industry and these contracts are included in
USASpending.gov data.\28\ Therefore, workers covered by these contracts
are captured in the methodology above.
---------------------------------------------------------------------------
\28\ The Department excludes from the OES data the 615,100
workers in NAICS 491110 who are Federal postal service employees but
includes workers in NAICS 492000: Couriers and Messengers.
---------------------------------------------------------------------------
This methodology represents the number of year-round potentially
affected employees who work exclusively on covered Federal contracts.
Thus, when we refer to potentially affected employees in this analysis
we are referring to this illustrative number of year-round potentially
affected employees who work exclusively on covered government
contracts. The number of employees who will gain benefits will likely
exceed this number since all workers may not work exclusively on
Federal contracts. However, data are not available to estimate the
number of employees gaining benefits. Implications of this for costs
and
[[Page 67677]]
transfers are discussed in the relevant sections.
Table 3--Number of Potentially Affected Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Covered Share Employees Employees
Private Total contracting output on direct on Federal Total
Industry NAICS employees output output from contracts lands and contract
(1,000s) (billions) (millions) covered (1,000s) concessions employees
\a\ \b\ \c\ contracting \d\ (1,000s) (1,000s)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry........................... 11 412 $454 $339 0.07% 0 0 0
Mining.......................................... 21 811 426 105 0.02 0 0 0
Utilities....................................... 22 554 391 3,043 0.78 4 7 12
Construction.................................... 23 6,393 1,320 24,194 1.83 117 1 119
Manufacturing................................... 31-33 12,303 5,940 20,703 0.35 43 0 43
Wholesale trade................................. 42 5,838 1,574 254 0.02 1 0 1
Retail trade.................................... 44-45 15,751 1,610 1,263 0.08 12 107 120
Transportation & warehousing.................... 48-49 4,789 1,071 11,005 1.03 49 98 147
Information..................................... 51 2,749 1,571 8,146 0.52 14 19 34
Finance and insurance........................... 52 5,666 2,275 18,734 0.82 47 0 47
Real estate and rental and...................... 53 2,066 3,264 1,174 0.04 1 0 1
Professional, scientific, and................... 54 8,483 1,979 136,870 6.92 587 9 596
Management of companies......................... 55 2,260 629 0 0.00 0 0 0
Administrative and waste........................ 56 8,882 891 29,781 3.34 297 18 315
Educational services............................ 61 2,814 332 4,290 1.29 36 1 37
Health care and social assist................... 62 17,754 2,234 22,845 1.02 182 1 182
Arts, entertainment, and rec.................... 71 2,243 311 103 0.03 1 14 15
Accommodation and food.......................... 72 12,923 961 1,161 0.12 16 28 44
Other services.................................. 81 4,010 672 2,387 0.36 14 1 15
-------------------------------------------------------------------------------------------------------
Total private............................... ........... 116,702 27,907 286,396 1.03 1,421 306 1,727
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ OES May 2015.
\b\ Bureau of Economic Analysis, NIPA Tables, Gross output. 2015.
\c\ USASpending.gov. Contracting expenditures for covered contracts in FY2015.
\d\ Assume share of expenditures on contracting is same as share of employment. Assumes all employees work exclusively on Federal contracts. Thus this
may be an underestimate if some employees are not working entirely on Federal contracts.
The above analysis, which largely follows the NPRM, found 1.4
million potentially affected employees associated with contracting
expenditures by the Federal government. However, as pointed out by SBA
Advocacy and the Chamber/IFA, the rulemaking also covers entities
operating under covered nonprocurement contracts on Federal property or
lands and these workers may not be represented above. To account for
these employees the Department used a variety of sources. First, the
Department estimated the number of entities operating under covered
nonprocurement contracts on Federal property or lands (section
V.B.ii.). Then the Department multiplied the number of contracting
firms by the number of potentially affected employees per contracting
firm by industry. Conceptually, this ratio was calculated by dividing
the potentially affected employees on direct contracts identified above
(1.4 million across all industries) by the 116,200 estimated number of
prime contractors and subcontractors with potentially affected
employees from USASpending (91,900 prime contractors in and 24,400
subcontractors) (V.B.ii.). However, this calculation was conducted at
the industry level and summed over industries. For example, in retail
trade, we estimate 12,000 potentially affected workers in 597 entities
(545 prime plus 52 subcontractors), for an average of 20.7 potentially
affected workers per firm. This estimate of potentially affected
workers per firm is multiplied by the estimated 5,184 entities
operating under covered nonprocurement contracts on Federal property or
lands in the retail trade industry, resulting in 107,000 potentially
affected employees in these firms. Summing these calculations over all
industries results in an additional 306,000 covered employees for a
total of 1.7 million potentially affected employees.
Because the Executive Order only applies to ``new contracts,''
coverage of the estimated total number of potentially affected
employees (1.7 million) will occur on a staggered year-by-year basis.
The Department accordingly needed to devise a method to estimate at
what rate the staggered coverage would occur. The Executive Order
defines a new contract to be either one for which a solicitation has
been issued, or for which the contract has been awarded outside the
solicitation process, on or after January 1, 2017. Consistent with the
Department's approach in the rulemaking implementing Executive Order
13658, see 79 FR 34568, 34596, 60693, the Department estimated that
twenty percent of contracts will qualify as ``new'' in Year 1. If
approximately twenty percent of contracts are new each year, then
almost all contracts should qualify as new for purposes of the
Executive Order by Year 5.\29\ The Department assumed employee coverage
would also occur on a uniform twenty percent year-by-year basis. The
Department accordingly multiplied the 1.7 million total potentially
affected employees by 0.2 to estimate that 345,000 employees may be
impacted in Year 1. In Years 2 through 5 a slightly larger number of
workers will be impacted due to projected employment growth.\30\
---------------------------------------------------------------------------
\29\ If some contracts last longer than 5 years, then not all
contracts will be covered by Year 5. For example, U.S. Forest
Service contracts for ski resorts can last 20 years or more.
\30\ The Department applied the geometric annual growth rate
based on the ten-year employment projection for 2014 to 2024 from
BLS' Employment Projections program by industry. Available at http://www.bls.gov/news.release/ecopro.t02.htm.
---------------------------------------------------------------------------
The Chamber/IFA questioned the Department's estimate of affected
employees in the NPRM on multiple grounds. As discussed below, the
Department disagrees with the commenters. First, the Chamber/IFA
believes the Department may have underestimated the number of affected
employees because the ``estimate is based only on consideration of
numbers of employees who may currently lack access to 7 days of paid
leave, and it ignores the impact on thousands more employees and their
employers because current programs offering 7 or more
[[Page 67678]]
days of leave fail to match other prescriptive details of the proposed
rule.'' Employers that offer seven days of paid sick leave but with
more restrictive usage will be required to broaden the use of their
paid sick leave policies in response to the rulemaking. For instance,
to the extent the employer's policy does not allow employees to use
paid sick leave for absences related to domestic violence, the policy
would need to be revised to comply with the Order and part 13.
Therefore, the Department agrees these workers may be beneficiaries of
this Final Rule. Although, as discussed below, the Department was able
to calculate imprecise estimates of the number of additional affected
employees, it has not included the costs or transfers associated with
these employees for two main reasons. First, the Department found no
applicable evidence to estimate the number of employees with paid sick
leave that have a more restrictive scope of use than required in this
Final Rule. Second, no strong evidence is available to estimate the
impact on the number of days of paid sick leave taken for these
employees who currently have a more restrictive scope of use in their
current paid sick leave access. Therefore, they are not included in the
analysis.
However, the Department identified some data appropriate for
illustrative estimates. According to the 2010 National Paid Sick Days
Study (NPSDS), 64 percent of workers have paid sick days but only 47
percent have paid sick days they are allowed to use to care for sick
family members.\31\ If we assume workers with paid sick leave that can
only be used for their own health are uniformly distributed across days
of paid leave then we can estimate the number of affected employees due
to expanded usage eligibility. We estimate 123,300 workers (115,700
full-time + 7,600 part-time) receive 7 days or more of paid sick leave
and thus will not receive additional days of paid leave.\32\ If 27
percent ((64 percent-47 percent)/64 percent) of these employees have
greater access to their paid sick leave due to expanded eligibility,
then an additional 32,800 employees may be considered ``affected'' in
Year 1 (an increase of 15 percent in Year 1). However, according to the
data from the American Time Use Survey, analyzed by the Council of
Economic Advisors,\33\ 53 percent of workers have paid sick days that
can be used for their own illness and 48 percent have paid sick days
that can be used to care for family members. As noted above, the
Department estimated that 123,300 potentially affected employees
receive 7 days or more of paid sick leave. If 9.4 percent ((53 percent-
48 percent)/53 percent) of these employees have usage extended then an
additional 11,600 employees may be considered ``affected'' in Year 1,
(a 5.2 percent increase in the number of affected employees).\34\
Therefore, depending on the source, the estimate of the incremental
number of affected employees due to expanded usage varies between
11,600 and 32,800 employees.\35\
---------------------------------------------------------------------------
\31\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitude
and Experiences. Public Welfare Foundation.
\32\ Based on estimates from 2015 NCS, 2011 ATUS, and 2015 CPS.
See section V.B.iv. for details.
\33\ The Council of Economic Advisers. (2014). The Economics of
Paid and Unpaid Leave.
\34\ This assumes all workers who have paid leave to care for
family members can use this leave to care for themselves.
\35\ This is potentially an underestimate since it does not
include any impacts due to additional uses allowed under this Final
Rule, such as domestic violence. The Department found no data on
current coverage for any additional uses to include in the estimate
of additional ``affected'' employees.
---------------------------------------------------------------------------
The second Chamber/IFA concern is that the Department is
underestimating affected employees because ``if government contract
work is more labor intensive per dollar expended than non-governmental
activity, then the number of affected employees will be . . .
commensurately greater than the numbers estimated by the Department in
its analysis.'' The Department calculated the number of employees based
on the share of government expenditures to all expenditures by
industry. Overall, the Department believes that services provided for
the government will not be any more or less labor intensive than
services provided for the private sector However, within industries,
government contract work could be more or less labor intensive than
private contract work. For example, because federal contracts for
construction services are more likely to be heavy or highway
construction, government contract work could involve different levels
of labor intensity than private contract work in the construction
industry. The Department believes that the differences in labor
intensity between contracted and non-contracted sectors across 2-digit
NAICS tend to balance each other out.
Third, the Chamber/IFA believes affected employees may be
underestimated because the Department assumed that employees were
working exclusively on Federal contracts. To the extent that employees
spend only a portion of their time working on federal contracts, the
number of affected employees will be higher than the number of year-
round exclusively federal contract employees estimated above. As
discussed above, data are not available on the share of an employee's
time that is spent on Federal contracting. The impact of this on
transfers was discussed in the NPRM and in this Final Rule in the
section on transfers (V.C.iii.). For this Final Rule we have added a
discussion regarding the impact on costs (V.C.ii.).
Fourth, the Chamber/IFA repeatedly stated that the Department
should have conducted a baseline survey of contracting firms to obtain
information about the prevalence of the ``15 plus specific elements''
required by the Rule. The commenters claim that the Department could
have conducted a survey ``following the issuance of Executive Order
13706 in September 2015'' and ``still be on schedule to complete the
contemplated rulemaking by September 30, 2016.'' The Department
believes that conducting such a survey is unnecessary because existing
data provides the information necessary to calculate reasonable
estimates of the total costs and transfers of this Final Rule.
iv. Number of Affected Employees
The Department used the 2015 National Compensation Survey (NCS) to
determine the proportion of potentially affected employees who already
receive paid sick leave. The NCS estimates that nationally 61 percent
of all private sector employees currently receive some paid sick
leave.36 37 However, this average can vary substantially by
industry and hours worked. To account for these differences the
Department performed its analysis by industry and full-time/part-time
status.\38\ The BLS reports the share of employees who receive paid
leave disaggregated by industry and separately by full-time status
(Table 4). However, the NCS does not publish data cross-tabulated by
[[Page 67679]]
industry and full-time status. For this Final Rule the BLS provided
this breakdown using the NCS microdata for categories with sufficient
observations to meet their publication criteria. For industries not
available from the NCS by part-time status, the Department estimated
the rates.\39\ The NCS does not include employees in the agriculture,
forestry, fishing and hunting industries; therefore, the Department
estimated the share of employees with access to paid sick leave in
those industries based on the 2011 ATUS Leave Module.\40\
---------------------------------------------------------------------------
\36\ National Compensation Survey, March 2015, Table 32. Leave
benefits: Access, private industry employees.
\37\ Data on paid sick leave are not available specifically for
Federal contractors. The Department assumes rates of paid sick leave
for Federal contractors are similar to all private sector workers.
\38\ The Department's analysis categorizes as full-time those
individuals who work 32 hours or more per workweek (rounded to the
nearest integer). 32 hours represents the line of demarcation
between workers who would and would not accrue 56 hours of paid sick
leave a year if they work a full year. The Department's designation
herein of certain individuals as ``full-time'' and other individuals
as ``part-time'' based on their usual hours worked is solely for
purposes of facilitating the economic analysis in this rulemaking.
\39\ The Department used the share of employees with sick leave,
for all employees and full-time employees, and the ratio of full-
time to part-time employees in each industry to estimate the shares
for part-time employees in those industries without part-time
employees' shares. The Department used data from the CPS to
calculate the ratio of full- to part-time employees. For example,
the NCS does not provide an estimate of the percentage of part-time
workers in the manufacturing industry with paid sick leave. NCS
provides estimates of 65 percent and 67 percent of all and full-time
workers, respectively, have some paid sick leave in the
manufacturing industry. Based on the 2015 CPS data, the Department
estimated that about 96% of workers in the manufacturing industry
work full-time. Since the 65 percent total is a weighted average of
full-time and part-time workers with paid sick leave, we estimated
the percentage of part-time workers in the manufacturing industry
with paid sick leave by solving for ``PT%'' in:
0.65 = (0.67*0.959) + (PT%*0.041).
\40\ The 2011 ATUS Leave Module is a special supplement to the
annual ATUS survey sponsored by the BLS and conducted by the U.S.
Census Bureau. It surveys employees nationally on use of leave. The
Department estimated the share of workers in the agriculture,
forestry, fishing and hunting industries that receive paid sick
leave. The ratio of leave benefits for full-time and part-time
workers from the NCS was applied to this total to estimate separate
rates for these two subgroups.
Table 4--Share of Employees With Paid Sick Leave by Industry and Full-Time Status
----------------------------------------------------------------------------------------------------------------
% With some paid sick leave
-----------------------------------------------
Industry NAICS Full-Time b Part-Time b
Total a (%) (%) (%)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting c.... 11 18 21 7
Mining.......................................... 21 64 65 d 27
Utilities....................................... 22 89 89 d 89
Construction.................................... 23 41 42 25
Manufacturing................................... 31-33 65 67 d 18
Wholesale trade................................. 42 77 80 d 41
Retail trade.................................... 44-45 50 73 27
Transportation and warehousing.................. 48-49 74 75 73
Information..................................... 51 92 95 51
Finance and insurance........................... 52 90 93 57
Real estate and rental and leasing.............. 53 72 80 d 36
Professional, scientific, and technical services 54 78 85 d 26
Management of companies and enterprises......... 55 90 91 d 81
Administrative and waste services............... 56 44 53 15
Educational services............................ 61 73 90 24
Health care and social assistance............... 62 72 85 36
Arts, entertainment, and recreation............. 71 48 71 29
Accommodation and food services................. 72 25 46 11
Other services.................................. 81 57 73 24
Total private................................... .............. 61 73 25
----------------------------------------------------------------------------------------------------------------
a National Compensation Survey, March 2015, Table 32. Leave benefits: Access, private industry workers (unless
otherwise noted). Assumes distribution of paid leave is similar for Federal contractors and other private
employees.
b The NCS does not publish data by industry and full-time status; however, for this Final Rule the BLS provided
this breakdown using the NCS microdata for industries with sufficient observations to meet their publication
criteria. Full-time is defined as 32 or more hours per week.
c NCS does not include information for this industry. Used 2011 ATUS Leave Module to estimate share of employees
in this industry with paid sick leave. Assumes distribution of paid leave is similar for Federal contractors
and other private sector employees.
d NCS does not include information for this industry and part-time status. The Department estimated these rates.
The Department estimated that of the 345,000 employees potentially
impacted in Year 1, approximately 294,000 are full-time employees and
51,400 are part-time employees.\41\ For full-time employees, across all
industries, 73 percent receive some paid sick leave and 27 percent
currently receive no paid sick leave. For part-time employees, 25
percent receive some paid sick leave and 75 percent receive no paid
leave. All employees with no paid sick leave will be affected
regardless of how many hours per week they work (assuming they work a
sufficient number of hours to accrue paid sick leave).
---------------------------------------------------------------------------
\41\ Based on the share of workers who are full-time in the 2015
CPS data. This assumes the share of government contractors that are
full-time is similar to private industry overall. As noted, full-
time is defined for purposes of this analysis as 32 or more hours
per week.
---------------------------------------------------------------------------
Additionally, some employees who currently receive paid sick leave
will also be affected by the Final Rule if they receive fewer than the
mandated number of days based on the required accrual rate. To
determine how many of these employees are affected, the Department used
NCS data on the distribution of days of leave. The 2015 NCS provides
the share of employees with a range of days of paid sick leave (e.g., 5
to 9 days per year).\42\ The NCS publishes these data aggregated across
all industries. However, since this analysis is conducted by industry,
the BLS provided the Department with these ranges of days disaggregated
by industry based on the NCS (see Appendix A). The Department then used
the categorical distribution of days for all workers in an industry and
full-time workers across industries to approximate these values for
both full-time and part-time workers by industry.\43\ This results in a
distribution by categories of days of sick leave by industry and full-
time status.
---------------------------------------------------------------------------
\42\ Table 35. Paid sick leave: Number of annual days by service
requirement, private industry workers, National Compensation Survey,
March 2015. Available at: http://www.bls.gov/ncs/ebs/benefits/2015/ownership/private/table35a.htm.
\43\ The distribution is available for all workers and full-time
workers but not part-time workers. Combining these data with the
share of workers who are full-time allowed the Department to
approximate the distribution for part-time workers.
---------------------------------------------------------------------------
The Department distributed the share of employees within each NCS
category (e.g., 5 to 9 days per year) of paid sick leave days across
the individual number of days in that category (e.g., 5, 6, 7, 8,
[[Page 67680]]
9) using a Poisson distribution that approximates the distribution of
days of paid sick leave provided to workers with this benefit.\44\ For
example, using the NCS data the Department estimates that 53 percent of
full-time employees with paid sick leave receive 5 to 9 days of leave.
Applying the Poisson distribution, the Department estimated 10 percent
of employees with paid sick leave currently receive 5 sick days, 13
percent currently receive 6 sick days, etc.\45\ The percent
distributions of days of paid sick leave are presented in Appendix A.
---------------------------------------------------------------------------
\44\ The Poisson distribution is frequently used for discrete
count data. The data were consistent with a Poisson distribution.
The distribution of days of sick leave is continuous but was
approximated using integers to allow use of the Poisson distribution
and to simplify the analysis. Aggregate findings would be highly
comparable if a continuous distribution had been used instead.
\45\ Some additional manipulations were made to the data in
cases where the Poisson distribution resulted in numbers
contradictory to the reported medians (see Appendix A).
---------------------------------------------------------------------------
The Executive Order generally measures paid sick leave in hours,
restricting a contractor from limiting total accrual of paid sick leave
per year, or any point in time, at less than 56 hours. Because the NCS
tabulates paid sick leave in days, the Department converted sick leave
hours to days to use the NCS. The Department assumed a standard 8 hours
worked per day, so the Executive Order provides a maximum accrual of 7
days of paid sick leave annually. Therefore, this analysis assumes
employees receiving at least 7 days of paid sick leave are not
affected.\46\
---------------------------------------------------------------------------
\46\ The number of days of leave for workers with paid time off
policies is unknown. The NCS estimates the distribution of days of
paid sick leave for workers with a set number of days of paid sick
leave. We assume this distribution of days of leave is the same for
workers with paid time off policies (and those with ``as needed''
paid sick leave provisions). This may result in an underestimate of
the number of days currently received by workers with a paid-time
off program because the SHRM (2008) estimates that workers with paid
time off policies receive an average of 15 days the first year of
service.
---------------------------------------------------------------------------
To estimate the number of affected employees in Year 1 the
Department summed the number of potentially affected employees with
less than 7 days of paid sick leave. The Department estimates 114,600
contract employees have no paid sick leave and will be affected. The
Department also estimates 107,500 contract employees have access to
paid sick leave but receive fewer than 7 days of paid sick leave (47
percent of workers with some paid sick leave) and are thus classified
as affected employees. The Department accordingly estimates that there
will be approximately 222,100 affected employees in Year 1 (Table 5).
v. Number of Additional Days of Paid Sick Leave Accrued by Affected
Employees
The Department estimated the number of additional paid sick leave
days the approximately 222,100 affected employees would need to receive
for contractors to comply with the Executive Order. This was done
somewhat differently for full-time and part-time employees. For full-
time employees with no paid sick leave the Department estimated they
will receive 7 additional days of paid sick leave. For full-time
employees with between 1 and 6 days of leave the Department estimated
the number of additional days they would need to receive to reach 7
days of paid sick leave (e.g., if they currently receive 1 day then
they will receive an additional 6 days).
To estimate the additional number of paid sick days per year that
would accrue to part-time employees as a result of the rule, the
Department first had to estimate hours of paid sick leave per year
currently available to these workers. To estimate paid sick leave hours
currently available to part-time employees required additional
calculations because the NCS reports days of paid sick leave per year,
not hours. Therefore, the Department adjusted part-time employees' days
of paid sick leave by assuming that the hours of paid sick leave
associated with ``one day'' of leave is equivalent to average hours
worked in a day. For example, if a part-time worker averages 6 hours of
work per work day, then one day of paid sick leave will also be equal
to 6 hours. To do this, the Department divided part-time workers'
average hours worked per week by 5 to calculate their average hours
worked per day by industry. The Department then multiplied average work
hours per day by NCS reported paid days of sick leave per year to
estimate part-time employees' hours of paid sick leave currently
available per year.
Next, the Department calculated the total hours of paid sick leave
per year that might accrue to a part-time worker as a result of this
E.O. Because paid sick leave is accrued at a rate of 1 hour per every
30 hours worked, the Department divided mean annual hours worked for
part-time workers in an industry by 30 to estimate the number of hours
of paid sick leave required under the Executive Order. The difference
between hours of paid sick leave currently available per year and hours
of paid sick leave per year required under the Executive Order is the
additional hours that accrue to part-time workers. This was then
divided by 8 to express the additional paid sick hours in terms of
standardized 8-hour days. Table 7 presents the adjusted numbers for
part-time employees.
As stated above, the Department is estimating a total of 222,100
affected employees in Year 1 (Table 5). The total number of additional
days of paid sick leave is then calculated by multiplying the number of
employees affected by the average number of additional days of paid
sick leave provided by the Final Rule (Table 6 and Table 7). The
Department estimated that the Final Rule will result in a total of
968,000 additional days of paid sick leave provided (792,000 days for
full-time workers and 176,000 days for part-time workers).\47\
---------------------------------------------------------------------------
\47\ This estimate is based on the marginal number of paid sick
days employers would have to provide due to this regulation. To the
extent employers that currently provide paid sick leave do not
modify their existing paid sick leave policies in accordance with
section 2(g) of the Executive Order and section 13.5(f), and to the
extent there are SCA- or DBA-covered employers who provide paid sick
leave as an SCA or DBA fringe benefit, this estimate may not
entirely reflect the total marginal number of days employers would
have to provide. However, the Department assumes firms will be able
to and will choose to apply the currently provided days of paid sick
leave toward the requirements of the Executive Order and this rule,
and the Department similarly understands that contractors generally
do not provide paid sick leave as an SCA or DBA fringe benefit.
Table 5--Number of Affected Employees in Year 1
----------------------------------------------------------------------------------------------------------------
Affected employees
--------------------------------------------------------------------------------
Industry With no paid With some paid
Total Full-Time a Part-Time a sick leave sick leave
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing 58 47 12 52 6
and hunting...................
Mining......................... 39 37 1 20 18
Utilities...................... 294 287 8 256 39
[[Page 67681]]
Construction................... 20,280 18,504 1,776 14,086 6,195
Manufacturing.................. 6,372 6,045 327 3,009 3,363
Wholesale trade................ 133 121 12 43 90
Retail trade................... 16,709 11,021 5,688 9,487 7,223
Transportation and warehousing. 15,609 13,857 1,752 7,427 8,182
Information.................... 2,587 2,042 545 701 1,886
Finance and insurance.......... 2,484 2,194 290 842 1,642
Real estate and rental and 95 73 22 42 54
leasing.......................
Professional, scientific, and 72,713 60,405 12,308 26,224 46,489
technical serv................
Management of companies and 0 0 0 0 0
enterprises...................
Administrative and waste 50,648 40,768 9,881 33,656 16,993
services......................
Educational services........... 2,456 1,275 1,181 1,716 739
Health care and social 19,587 14,554 5,033 8,601 10,985
assistance....................
Arts, entertainment, and 2,184 1,276 908 1,328 856
recreation....................
Accommodation and food services 7,718 4,451 3,267 5,895 1,823
Other services................. 2,092 1,365 727 1,208 884
--------------------------------------------------------------------------------
Total private.............. 222,059 178,320 43,739 114,593 107,465
----------------------------------------------------------------------------------------------------------------
a Part-time is defined as working less than 32 hours per week.
Table 6--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Full-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of full-time potentially affected employees accruing annually the Days
following number of days of sick leave Affected additional
Industry ---------------------------------------------------------------------------- employees sick leave
0 1 2 3 4 5 6 7+ available
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing.................... 41 0 0 1 2 1 1 5 47 302
Mining............................................ 19 0 0 0 0 3 15 18 37 157
Utilities......................................... 250 0 0 0 0 8 29 1,982 287 1,792
Construction...................................... 12,626 154 475 980 1,515 1,448 1,307 3,265 18,504 104,346
Manufacturing..................................... 2,721 55 228 626 1,291 562 562 2,200 6,045 28,580
Wholesale trade................................... 35 1 5 15 30 18 16 53 121 480
Retail trade...................................... 4,686 115 356 734 1,135 1,967 2,028 6,335 11,021 47,574
Transportation and warehousing.................... 6,567 77 358 1,107 2,568 1,249 1,931 12,411 13,857 64,780
Information....................................... 295 8 38 116 270 516 799 3,865 2,042 5,409
Finance and insurance............................. 617 7 41 171 528 271 559 6,614 2,194 7,933
Real estate and rental and leasing................ 24 1 3 7 11 13 13 49 73 294
Professional, scientific, and..................... 15,758 394 1,625 4,467 9,214 12,188 16,759 44,647 60,405 207,437
Management of companies........................... 0 0 0 0 0 0 0 0 0 0
Administrative and waste services................. 24,702 301 1,241 3,414 7,042 1,930 2,138 11,789 40,768 221,703
Educational services.............................. 590 4 24 90 255 108 204 4,623 1,275 5,818
Health care and social assistance................. 4,505 152 628 1,726 3,561 1,676 2,305 15,482 14,554 58,835
Arts, entertainment, and recreation............... 574 19 58 119 185 158 163 702 1,276 5,929
Accommodation and food services................... 2,872 43 133 275 425 346 356 867 4,451 24,452
Other services.................................... 580 11 47 129 265 140 192 784 1,365 6,146
-----------------------------------------------------------------------------------------------------
Total private................................. 77,462 1,342 5,260 13,977 28,298 22,603 29,378 115,693 178,320 791,969
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.
Table 7--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Part-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of full-time potentially affected employees accruing annually Days
the following number of days of sick leave Affected additional
Industry ------------------------------------------------------------------------ employees sick leave
0 1 2 3 4 5 6 7+ available a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing & hunting.............. 11 0 0 0 0 0 0 0 12 46
Mining................................................ 1 0 0 0 0 0 0 0 1 5
Utilities............................................. 6 0 0 0 0 0 1 49 8 31
Construction.......................................... 1,459 11 29 53 72 79 73 170 1,776 7,503
Manufacturing......................................... 288 1 3 7 13 7 7 24 327 1,381
Wholesale trade....................................... 9 0 0 1 1 1 1 2 12 45
Retail trade.......................................... 4,801 22 59 107 145 292 264 888 5,688 23,165
Transportation and warehousing........................ 860 13 51 140 285 171 232 1,433 1,752 5,730
Information........................................... 406 1 3 9 19 45 61 283 545 1,822
Finance and insurance................................. 225 0 2 7 19 13 23 234 290 1,196
Real estate and rental and leasing.................... 17 0 0 1 1 1 1 5 22 81
Professional, scientific, and technical............... 10,467 22 78 189 343 548 662 1,842 12,308 47,125
Management of companies and........................... 0 0 0 0 0 0 0 0 0 0
Administrative and waste services..................... 8,954 23 83 200 363 120 137 653 9,881 42,049
[[Page 67682]]
Educational services.................................. 1,127 0 2 7 18 10 16 301 1,181 4,671
Health care and social assistance..................... 4,096 19 69 167 302 172 208 1,367 5,033 20,469
Arts, entertainment, and recreation................... 754 5 15 27 37 37 33 154 908 3,302
Accommodation and food services....................... 3,023 9 23 42 58 55 57 130 3,267 14,564
Other services........................................ 628 2 7 17 31 19 23 99 727 2,861
-------------------------------------------------------------------------------------------------
Total private..................................... 37,132 127 426 975 1,708 1,570 1,802 7,635 43,739 176,048
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.
a This is expressed in terms of standardized 8-hour days, as described in the text.
To estimate the number of affected employees in later years, the
Department calculated the average annual geometric growth rate in
employment based on the ten-year employment projection for 2014 to 2024
from BLS' Employment Projections program. Table 8 shows the number of
affected employees in Years 1 through 10, along with the number of
employees with no paid sick leave currently, with some paid sick leave,
and by full-time/part-time status. The share of employees working full-
time in 2015 and the share of employees with no paid sick leave were
applied to projected years.
Table 8--Affected Employees in Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Affected employees (1,000s)
-------------------------------------------------------------------------------
Year With some
Total Full-Time Part-Time With no paid paid sick
sick leave leave
----------------------------------------------------------------------------------------------------------------
Year 1.......................... 222.1 178.3 43.7 114.6 107.5
Year 2.......................... 454.0 364.6 89.4 234.3 219.7
Year 3.......................... 686.1 551.0 135.1 354.1 332.0
Year 4.......................... 918.3 737.4 180.9 473.9 444.4
Year 5.......................... 1,150.6 924.0 226.6 593.8 556.8
Year 6.......................... 1,161.0 932.3 228.7 599.1 561.9
Year 7.......................... 1,171.5 940.7 230.7 604.5 566.9
Year 8.......................... 1,182.1 949.3 232.8 610.0 572.1
Year 9.......................... 1,192.8 957.9 235.0 615.6 577.3
Year 10......................... 1,203.7 966.6 237.1 621.2 582.5
----------------------------------------------------------------------------------------------------------------
The Department estimates that once all covered contracts have been
renewed (in Year 5), the equivalent of 1.2 million year-round
exclusively federal contract employees will be affected by this Final
Rule. The Economic Policy Institute developed a range of estimates that
are comparable; they found that ``between 694,000 and 1,053,000
employees of Federal contractors may directly benefit with additional
paid sick leave.'' Their estimates use data from the General Services
Administration's (GSA's) Federal Procurement Data System, the BLS'
Employment Requirements Matrix, and the BLS' NCS. EPI's estimated
number is consistent with the Department's estimate in the NPRM because
both estimates included only employees working on contracts in
USASpending.gov. As noted previously, the Department added employees
working on contracts on Federal property or lands in the analysis of
this Final Rule, which increased the estimated number of affected
employees.
C. Impacts of Final Rule
i. Overview
This section presents direct employer costs, transfer payments and
DWL associated with the Final Rule. These impacts were projected for 10
years. The Department estimated average annualized direct employer
costs of $27.3 million, transfer payments of $349.6 million and DWL of
$734,000. As these numbers demonstrate, the largest quantified impact
of the Final Rule will be the transfer of income from employers to
employees. The Department also discusses the many benefits of this rule
qualitatively.
ii. Costs
The Department quantified three direct employer costs: (1)
Regulatory familiarization costs; (2) implementation costs; and (3)
recurring administrative costs. Other employer costs are considered
qualitatively. This section explains the methodology and responds to
commenters. Some commenters believe our costs estimates are too low;
where appropriate, estimates were adjusted. Other commenters provided
evidence from state and municipal laws demonstrating that costs will be
low. For instance, the Seattle Office of Labor Standards cited a study
that found the costs of the Seattle paid leave law have been modest,
stating: ``[T]here is no evidence that the Ordinance caused employers
to go out of business, and 70% of employers were either ``somewhat'' or
``very'' supportive of the Ordinance.'' \48\ They also cite a study by
the Main Street Alliance of Washington that found ``no evidence of
widespread negative economic impacts.'' \49\ Similarly, many commenters
submitted a form letter that cites the Vice
[[Page 67683]]
President of the San Francisco Chamber of Commerce saying that the San
Francisco law's impact on employers was ``minimal'' (due to responses
by employers that allow them to lower costs, such as having current
employees cover for others using paid sick leave instead of hiring
replacement labor).\50\ These commenters also cited research finding
that the Connecticut paid sick leave ``law had a minimal impact on
costs'' \51\ for employers. The Leadership Conference on Civil and
Human Rights cited research showing that ``CEOs support paid sick time
73 percent to 16 percent, and support `more time off to take care of
sick children or other relatives' 83 percent to 5 percent.'' \52\
---------------------------------------------------------------------------
\48\ Romich, J., Bignell, W., Brazg, T, Johnson, C., Mar, C.,
and et al. (2014). Implementation and Early Outcomes of the City of
Seattle Paid Sick and Safe Time Ordinance. University of Washington.
Available at: http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
\49\ Main Street Alliance of Washington. (2013). Paid Sick Days
and the Seattle Economy: Job Growth and Business Formation at the 1-
year Anniversary of Seattle's Paid Sick and Safe Leave Law.
Available at: http://www.seattle.gov/Documents/Departments/CivilRights/psst-report-main_street_alliance.pdf.
\50\ Swarns, R. (2014). Despite Business Fears, Sick-Day Laws
Like New York's Work Well Elsewhere. New York Times. Available at:
http://www.nytimes.com/2014/01/27/nyregion/despite-business-fears-sick-day-laws-like-new-yorks-work-well-elsewhere.html.
\51\ Appelbaum, E., Milkman, R., Elliott, L., and Kroeger, T.
(2014). Good for Business? Connecticut's Paid Sick Leave Law. Center
for Economic and Policy Research and The Murphy Institute at the
City University of New York Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\52\ Bottari, M. (2016). Highlights of Luntz Poll of American
CEOs Shows Broad Support for Progressive Policies, PRWatch, Center
for Media and Democracy.
---------------------------------------------------------------------------
1. Regulatory Familiarization Costs
The Final Rule will impose direct costs on covered contractors by
requiring them to review the regulation. The Department believes that
all Federal contracting firms that have or expect to have covered
contracts will incur regulatory familiarization costs because all
establishments will need to determine whether they are in compliance.
As explained above, in response to comments the Department revised the
number of potentially affected contracting firms to include entities
operating on Federal lands and property. See section V.B.ii. for a
description of the number of these potentially affected contracting
firms. The Department estimated in the NPRM, based on the GSA's SAM
data in August 2015, that there were 543,900 Federal contracting firms.
In the NPRM the Department included contracting firms strictly
providing materials and supplies to the government and other firms with
no Federal contracts covered by the Executive Order because they may
incur some regulatory familiarization costs.\53\ However, the
Department also noted that these firms may not incur regulatory
familiarization costs, resulting in an overestimate of the number of
potentially affected contractors. The Chamber/IFA wrote that the
Department's estimate of regulatory familiarization costs is based on
the assumption that ``only successful contract bidders will incur
familiarization cost.'' To clarify, our estimate includes firms that
are registered in SAM but that do not have covered contracts. Thus, it
includes most firms serious about bidding. The Chamber/IFA also wrote:
``Even contractors exempt from the proposed rule for some reason will,
first, have to review the regulation and their own book of contracts
(and prospective bids) to make such a determination.'' The Department
acknowledges these firms may still incur some minimal regulatory
familiarization costs and has therefore included them in the estimate
of potentially affected contactors.
---------------------------------------------------------------------------
\53\ In addition, at the time the NPRM was prepared, the
Department had not developed a method to estimate and exclude firms
strictly providing materials and supplies to the government and
firms without Federal contracts. The Department has since devised a
method to identify and exclude such firms which is done when
estimating the number of contractors with affected employees.
---------------------------------------------------------------------------
In the NPRM the Department assumed one hour of a human resources
manager's time will be spent reviewing the rulemaking. Some commenters
believe this is an underestimate. The Chamber/IFA wrote ``experience
based on other recent regulations . . . shows that the initial
familiarization process entails many hours of involvement by a variety
of company executives, attorneys and consultants.'' TrueBlue, Inc.
wrote: ``We have already spent well more than [one hour] trying to
decipher this rule.'' In response to these comments, the Department has
increased this estimate to two hours per firm. The Department also
notes that the time estimate is an average over all firms the
Department has identified as potentially affected. As stated in the
previous paragraph, the estimate includes firms expected to have very
minimal or no regulatory familiarization costs such as contractors only
holding or bidding on contracts for products. Thus, while some firms
presumably will spend more than two hours on regulatory
familiarization, the Department believes that the average amount of
time potentially affected contractors will spend on regulatory
familiarization is two hours.
The Chamber/IFA also wrote that ``[t]here may be circumstances
under which a familiarization effort may require repetition. For
example, a large firm with decentralized contract teams, may find that
multiple familiarization activities occur as different teams within the
company make independent bid decisions on different contract
opportunities.'' However, the commenters provided neither evidence of
the prevalence of these circumstances nor an average number of teams
per firm with these circumstances. The Department accordingly cannot
confirm how commonly, if at all, this scenario will occur. Even
assuming it does, the Department lacks the data to make an estimate
related to additional familiarization costs.
The cost of this time is the mean wage for a human resource manager
of $82.17 per hour.\54\ In the NPRM, based on 2014 data, this wage rate
was $79.96. The Chamber/IFA believes this is too low because it does
not include the ``full economic opportunity cost.'' It suggests that a
``practical approximation may be provided by the indirect overhead and
profit mark-ups relative to direct labor cost that government contracts
permit.'' Thus, the Chamber/IFA believes direct wages should be
multiplied by 3.25 instead of the 1.46 used in the proposed rule.
---------------------------------------------------------------------------
\54\ This includes the mean base wage of $56.29 from the
Occupational Employment Statistics (OES) plus benefits paid at a
rate of 46 percent of the base wage, as estimated from the BLS's
Employer Costs for Employee Compensation (ECEC) data. OES data
available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------
The Department disagrees with the mark-up rate suggested by the
Chamber/IFA because it is not appropriate to apply a load factor used
on direct labor costs to indirect labor. That is, the markup rate
suggested by the commenters includes indirect overhead labor (i.e.,
time for human resource workers), and it is inappropriate to mark-up
that indirect cost (i.e., HR workers' wages) for indirect costs (e.g.,
additional HR time). The Department also disagrees with the mark-up
rate suggested by the commenters because the relatively small costs of
this rulemaking (relative to payroll or revenue, see section V.C.vii.)
are likely to have little to no effect on the cost of overhead and
support services in addition to the overhead costs estimated in this
cost section. Most overhead costs are largely fixed and will be
unaffected. For example, building rent, heat and electricity are
unlikely to change. For these reasons, the Department has continued to
use the NPRM mark-up rate in the Final Rule.\55\
---------------------------------------------------------------------------
\55\ The Department acknowledges that there might be overhead
costs and thus conducted a sensitivity analysis using an additional
overhead rate of 17 percent. This rate is based on a Chemical
Manufacturers Association Study and has been used in the
Environmental Protection Agency's Final Rules (see for example, EPA
Electronic Reporting under the Toxic Substances Control Act Final
Rule, Supporting & Related Material). However, an overhead rate
based on the chemical manufacturing industry may not be appropriate
for all industries, and thus we present this estimate as an
illustrative example. Adding an additional overhead rate of 17
percent would increase total costs (regulatory familiarization
costs, implementation costs, and administrative costs) by $14.6
million in Year 1, an increase of 11.6 percent. As previously noted,
the Department believes this overestimates the overhead costs
attributable to this rulemaking, but recognizes that there is not a
definitive approach to estimating the marginal cost of labor.
---------------------------------------------------------------------------
[[Page 67684]]
Therefore, for this Final Rule, the Department has estimated
regulatory familiarization costs to be $80.4 million ($82.17 per hour x
2 hours x 489,400 contractors) (Table 9). The Department has included
all regulatory familiarization costs in Year 1. We believe firms will
need to familiarize themselves with the rule in Year 1 in order to
identify whether any contracts will be covered in Year 1. It is
possible a contractor will postpone the familiarization effort until it
is poised to have a covered contract (i.e., a new contract within one
of the 4 covered categories). However, since many contractors will have
at least one new contract in Year 1, and the Department has no data on
when contractors will first be affected, the Department has included
all regulatory familiarization costs in Year 1.
Table 9--Year 1 Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Initial Initial
Regulatory implementation implementation Recurring Recurring
Variable familiarization costs (no costs (current implementation administrative
costs current policy) policy) costs costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hours per potentially affected contractor................ 2 10 1 N/A N/A
Hours per employee....................................... N/A N/A N/A 1 0.33
Potentially affected contractors \a\..................... 489,419 92,990 396,430 N/A N/A
Newly affected employees................................. N/A N/A N/A 222,059 N/A
Total affected employees................................. N/A N/A N/A N/A 222,059
Loaded wage rate......................................... $82.17 $27.50 $27.50 $27.50 $27.50
Base wage b.......................................... $56.29 $18.84 $18.84 $18.84 $18.84
Benefits adj. factor c............................... 1.46 1.46 1.46 1.46 1.46
Cost ($1,000s)........................................... $80,427 $25,573 $10,902 $6,107 $2,036
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Total number of prime contractors from the GSA's SAM from August 2015 and subcontractors from USASpending.gov. Number of entities operating under
covered contracts on Federal property from various sources. Total is split between firms with and without a sick leave policy based on results from a
SHRM survey.
\b\ Regulatory familiarization uses OES mean wage for human resource managers in 2015. Available at: http://www.bls.gov/oes/current/oes113121.htm. Other
costs use OES mean wage for human resources assistants, except payroll and timekeeping in 2015. Available at: http://www.bls.gov/oes/current/oes434161.htm.
\c\ Ratio of loaded wage to unloaded wage from the 2015 ECEC.
2. Implementation Costs
Firms will incur implementation costs. The Department believes some
of these costs will be incurred in Year 1 and will occur regardless of
the number of employees affected but other implementation costs will be
incurred as employees become covered and be a function of the number of
affected employees. Therefore, the Department modeled this in two
parts. First, firms will incur upfront implementation costs (e.g.,
fixed time costs associated with making baseline adjustments to
accounting and payroll software that are not dependent on the size of
the firm). Second, because we believe overall implementation costs will
generally vary with the size of the firm, we have included a cost per
affected employee. Because this Final Rule will only apply to employees
on new contracts, the Department estimates it will take approximately
five years to phase in the coverage over nearly all affected employees.
Therefore, recurring implementation costs will generally be spread over
the first five years that the regulation is in effect, with some fixed
costs upfront. As each contract becomes affected, the covered
contractors will need to spend some time updating the accounting
systems used to track paid sick leave and training managers responsible
for implementing the requirements of the Executive Order and this rule.
Fixed costs that do not vary by number of employees are assumed to
be a small share of total implementation costs but they provide an
opportunity to vary costs across firms with and without sick leave
programs in place. The Department assumed firms that need to create a
sick leave policy will each spend 10 hours of time developing this
policy, regardless of the number of employees, and firms with a program
in place will spend one hour, regardless of the number of
employees.\56\ According to a survey conducted by the Society for Human
Resource Management (SHRM), 81 percent of companies provided some form
of paid sick leave.\57\ As noted above, the Department estimated there
are 489,400 Federal contracting firms. Therefore, the Department
estimated 93,000 firms will need to create a sick leave policy (19
percent of 489,400 firms). The remaining 396,400 firms would have lower
implementation costs. The share of firms with a system in place is
consistent with findings from one study of the San Francisco paid sick
leave ordinance that found ``only one-sixth needed to introduce an
entirely new paid sick days policy because of the law.'' \58\ This is
16.7 percent, which is comparable to the SHRM estimate (19 percent) the
Department used above.
---------------------------------------------------------------------------
\56\ When developing the NPRM the Department identified little
applicable data from which to estimate the amount of time required
to make these adjustments. One source, based on a small sample,
finds the average one-time implementation costs ranged from zero to
$125,000 with an average of 0.125 percent of revenue. See Romich,
J., et al. (2014). Implementation and Early Outcomes of the City of
Seattle Paid Sick and Safe Time Ordinance. However, the authors
note: ``These respondents are self-selected and too few to provide
statistically representative data. However, their responses offer a
qualitative sense of the range of possible costs.''
\57\ Society for Human Resource Management. (2008). Examining
Paid Leave in the Workplace: Helping Your Organization Attract and
Retain Talented Employees. SHRM reports are available based on more
recent surveys, which indicate a greater proportion of firms have a
paid sick leave program than the 81 percent figure used here.
However, the newer estimates seem inconsistent with data from other
sources concerning the prevalence of paid sick leave programs;
because of this uncertainty, and to avoid a possible underestimate
of implementation costs, the Department has relied here on the
earlier SHRM report.
\58\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employees and Employers. Institute for
Women's Policy Research.
---------------------------------------------------------------------------
In addition to these fixed costs, all firms with affected employees
will have additional implementation costs that vary based on the number
of affected employees. The Department also assumed, as it did in the
NPRM, that firms will spend one hour on implementation costs per newly
affected employee. Total implementation costs are therefore a function
of whether the firm has a system in place and the number of affected
employees.
[[Page 67685]]
For this Final Rule, the Department has included a table
demonstrating average implementation hours by contractor size. For a
contractor with a current paid sick leave policy and 50 affected
employees, we estimated they will spend 51 hours over five years
implementing the program. We estimated that a contractor without a
current paid sick leave policy and 50 affected employees will spend a
total of 60 hours over five years implementing the program. Contractors
with no affected employees are estimated to accrue just the fixed
implementation costs. This includes covered contractors whose paid sick
leave policies already provide for at least one hour of paid sick leave
per 30 hours worked; contracting firms strictly providing materials and
supplies to the government; and other firms registered in SAM with no
Federal contracts covered by the Executive Order. This is an
overestimate of the number of firms incurring fixed implementation
costs; contracting firms only providing materials and supplies will
incur no fixed implementation costs because they have no employees
working on covered contracts and will not have to make any changes to
their current systems. Thus, while some firms may spend more than one
hour (or 10 hours depending on whether they currently have a system in
place), other firms will spend less time; one hour (or 10 hours for a
firm with no system) is used to approximate the average time spent for
all of the potentially affected contracting firms.
Table 10--Implementation Hours by Employer Size Over 5 Years
----------------------------------------------------------------------------------------------------------------
Per firm hours for implementation over 5 years
Number of affected employees -------------------------------------------------
No current policy Current policy
----------------------------------------------------------------------------------------------------------------
1-5........................................................... 11-15 2-6
6-10.......................................................... 16-20 7-11
11-20......................................................... 21-30 12-21
21-50......................................................... 31-60 22-51
51-100........................................................ 61-110 52-101
101-500....................................................... 111-510 102-501
501-1,000..................................................... 511-1,010 502-1,001
1,001-2,000................................................... 1,011-2,010 1,002-2,001
----------------------------------------------------------------------------------------------------------------
The Department values this time using human resources worker's mean
wage of $27.50 per hour.\59\ Initial implementation costs in Year 1
were estimated to be $36.5 million ($27.50 per hour x 10 hours x 93,000
contractors plus $27.50 per hour x 1 hour x 396,400 contractors) (Table
9). The Department assumes recurring implementation costs will use one
hour of a human resource worker's time per newly affected employee. As
stated above, the Department found that the average wage with benefits
for a human resources worker is $27.50 per hour. The estimated number
of newly affected employees in Year 1 is 222,100 (Table 9). Therefore,
total Year 1 recurring implementation costs were estimated to equal
$6.1 million ($27.50 x 1 hour x 222,100 employees). The Chamber/IFA
asserted that implementation will require the time of multiple
employees at various levels within a company and thus a blended wage
rate should be used. However, the Department believes a human resources
worker is capable of performing the tasks necessary for a contractor to
implement the Order and this part, and the Chamber provided no specific
basis for computing a blended wage rate.
---------------------------------------------------------------------------
\59\ This includes the mean base wage of $18.84 from the OES
plus benefits paid at a rate of 46 percent of the base wage, as
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------
The Chamber/IFA contended that affected employees were
underestimated in the NPRM (as mentioned previously) and that this may
cause costs to be underestimated. It expressed concern that the
Department's ``estimate is based only on consideration of numbers of
employees who may currently lack access to 7 days of paid leave, and it
ignores the impact on thousands more employees and their employers
because current programs offering 7 or more days of leave fail to match
other prescriptive details of the proposed rule.'' The Department's
estimate of implementation costs in this Final Rule includes an hour of
implementation time for contractors that currently offer 7 or more days
of sick leave, i.e., the initial implementation cost. The Department
believes the costs associated with changing a paid sick leave policy
solely to meet the prescriptive details of the Order and implementing
regulations will be minimal, particularly because some contractors
likely provide an opportunity to take 7 or more days of paid sick leave
in programs for which leave is already permitted for any reason, and
that its one-hour estimate is accordingly appropriate.
As noted earlier, the Chamber/IFA also believes affected employees
may be underestimated because the analysis assumes workers are working
only on Federal contracts. This modeling method was retained in the
Final Rule because the number of truly affected employees is unknown.
The number of employees sharing work on Federal contracts will impact
recurring costs; therefore the Department tried to take into account
that this work may be spread over several employees when it estimated
the amount of time per affected employee--i.e. per affected full-year-
on-federal-contract equivalents--necessary for implementation and
administrative activities. If this has not been adequately reflected in
the time cost estimates, and the costs used instead better represent
costs per one worker working exclusively on Federal contracts, then the
total costs may be underestimated. Unfortunately, data are not
available to determine whether this is true and if so, how much higher
costs may be.
Various commenters, including AGC, the Chamber/IFA, TrueBlue, Inc.,
the American Benefits Council, PSC and Integrated Facility Services,
also expressed a general concern that the Department's time estimates
were low. For example, TrueBlue, Inc. asserted the time estimates are
inaccurate because ``[m]aking the necessary procedural, IT
infrastructure, and administrative changes needed to accommodate and
comply with the proposed rules is complicated, daunting, time-
consuming, and leaves any employer open to making potentially costly
mistakes.'' Additionally, the Chamber/IFA expressed a concern that the
Department's estimate of the time allotted for implementation is
insufficient for the amount of training required in a company to
implement
[[Page 67686]]
this regulation. However, the Department believes that the total hours
estimated for implementation by companies, as demonstrated in Table 10
above, adequately covers any training, IT, and administrative time that
might be necessary to implement any changes. Indeed, other commenters
provided evidence from state and municipality laws that supports the
Department's assessment concerning the size of implementation costs.
For example, many commenters submitted a form letter that cites
research finding that 70 percent of employers in the city of Seattle
had experienced no administrative difficulties with implementation.\60\
Another report found that in Connecticut almost half of employers
reported that the new state law had caused no change in their overall
costs.61 62 Evidence from state and local laws is discussed
in additional detail in the section on ``Other Potential Costs.''
---------------------------------------------------------------------------
\60\ Romich, Romich, J., Bignell, W., Brazg, T., Johnson, C.,
Mar, C., Morton, J., & Song, C. (2014). Implementation and Early
Outcomes of the City of Seattle Paid Sick and Safe Time Ordinance.
University of Washington Publication. Available at http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
\61\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-business-2014-02-21.pdf.
\62\ However, it should be noted that the Connecticut law may be
easier to implement since it applies to all workers at a firm.
Therefore, it does not necessitate tracking hours on different
contracts.
---------------------------------------------------------------------------
The Department has carefully reviewed the comments suggesting its
implementation costs estimate in the NPRM was too low as well as the
comments suggesting that the Department's estimate in the NPRM was
appropriate. For the reasons described above, the Department has not
adjusted the implementation time estimates for this Final Rule.
3. Recurring Administrative Costs
Contractors may incur recurring administrative costs associated
with maintaining records of paid sick leave, approving leave, and
adjusting scheduling. In the NPRM the Department assumed an HR worker
will spend on average an additional fifteen minutes per affected
employee annually on administrative costs. We believe these costs will
be relatively small because employers already have systems in place and
already incur many of these costs for employees who take sick leave.
For example, managers may need to adjust scheduling when workers take
time off due to illness regardless of whether that sick leave is paid
or unpaid. These costs should therefore reflect only the costs
associated with the marginal number of days of leave taken due to the
implementation of this Final Rule. The additional number of days of
leave taken is unknown but estimates tend to be in the 1-to-2 day
range. For example, Ahn and Yelowitz (2016) found that paid sick leave
results in workers staying home 1.2 more days a year.63 64
---------------------------------------------------------------------------
\63\ Ahn, T. and Yelowitz, A. (2016). Paid Sick Leave and
Absenteeism: The First Evidence from the U.S. Available at: http://ssrn.com/abstract=2740366.
\64\ Using the ATUS 2011 Leave Module, the Department estimated
workers with paid sick leave take on average an additional 2.3 hours
of sick leave compared to workers with no paid sick leave annually.
Using the National Health Interview Survey (NHIS) the Department
found workers with paid sick leave took on average 0.77 more days of
sick leave than did workers without paid sick leave.
---------------------------------------------------------------------------
Many commenters, including the Chamber/IFA, PSC, American Outdoors
Association and the National Roofing Contractors Association asserted
the rule would be administratively burdensome and/or that the proposed
cost is too low. For example, the Chamber/IFA believes the 15-minute
estimate is too low because it does not include time for workers to
enter their hours, and the National Roofing Contractors Association
asserts that its members are concerned the paid sick leave mandate will
disrupt their daily operations.
Other commenters discussed the high cost of tracking hours worked
on Federal contracts. For example, SBA Advocacy contended construction
industry representatives have represented that segregating covered
federal work from non-federal work for the accrual of paid sick leave
will be challenging because their employees often work at multiple
locations for multiple clients. However, the Department believes that
for billing and/or other purposes most businesses already track hours
spent on work for different clients on different contracts. For
example, hours worked by laborers and mechanics on DBA contracts must
already be monitored and reported. SBA Advocacy believes this may be a
concern for seasonal recreation businesses which it asserts ``often
have large numbers of part time workers and operate in remote
locations, shifting from covered and non-covered work for multiple
days.''
Conversely, some commenters provided evidence from state and
municipality laws demonstrating that administrative costs will be low.
For example, many commenters cited a study of Connecticut's paid sick
leave law that found employers ``typically found that the
administrative burden was minimal.'' 65 66 The study authors
wrote: ``In our fieldwork, some managers noted that it took time and
effort to establish mechanisms to track employee hours for those
receiving paid sick day coverage for the first time. However, once
those mechanisms were in place, the staff required to administer the
law was modest.'' Evidence from state and local laws is discussed in
additional detail in the section on ``Other Potential Costs.''
Additionally, some commenters drew upon their own experience as
evidence that providing paid sick leave is not overly burdensome to
implement. Hawthorne Auto Clinic has 33 years of experience providing
sick leave to employees and wrote ``[b]ased on our experience, I am
confident that other businesses will find it simple to implement paid
sick days policies.''
---------------------------------------------------------------------------
\65\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\66\ However, it should be noted that the Connecticut law may be
easier to implement since it applies to all workers at a firm.
Therefore, it does not necessitate tracking hours on different
contracts.
---------------------------------------------------------------------------
The Department believes most employers already track employees'
time and thus these costs would be negligible. The Department has also
reduced both the frequency with which contractors must calculate
covered employees' accrued paid sick leave, and the frequency with
which contractors must inform covered employees of the paid sick leave
they have accrued, as explained in the discussion of subpart A above.
Therefore, the recurring administrative costs of this Final Rule will
be lower than the proposed rule. However, despite that, the Department
agrees with commenters that these administrative costs may be
underestimated and has increased the time estimate from 15 minutes per
affected employee to 20 minutes in order to be responsive to comments.
The Department would like to emphasize this is the average amount of
time per affected employee. Some employees may require more time; for
example, employees whose requests are denied might require more
administrative effort. However, many employees do not take any sick
leave and their costs would be negligible. Based on tabulations of the
2014 National Health Interview Survey (NHIS) data, the Department
estimated that 46.9 percent
[[Page 67687]]
of workers with paid sick leave do not take any sick leave in a
year.\67\
---------------------------------------------------------------------------
\67\ However, due to the additional uses allowed under this
rulemaking and the provisions to prevent retaliation, use may be
expanded due to this Final Rule.
---------------------------------------------------------------------------
The cost of this time is estimated as the mean wage for a human
resource worker of $27.50 per hour.\68\ The Department estimates in
Year 1 there will be 222,100 affected employees. Under these
assumptions, administrative costs in Year 1 will total $2.0 million
($27.50 x (20 minutes/60 minutes) x 222,100 employees). Although these
costs are relatively small in Year 1, they will occur annually and thus
be a significant share of costs in the long run.
---------------------------------------------------------------------------
\68\ This includes the mean base wage of $18.84 from the 2015
OES plus benefits paid at a rate of 46 percent of the base wage, as
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------
Some commenters, including the Chamber/IFA, argued this wage is
inappropriate. However, the Chamber did not provide any evidence for
what a more appropriate wage rate would be. Additionally, as noted
earlier, the Chamber/IFA believes affected employees may be
underestimated because we assume employees are working exclusively on
Federal contracts. As noted in the section on implementation costs,
because the number of truly affected employees is unknown, the
Department considered costs related to the equivalent of one employee
working exclusively on Federal contracts.
4. Projected Costs
Table 11 shows estimated costs for each of the first 10 years as
well as average annualized costs over the same period. Regulatory
familiarization and initial implementation costs will only accrue in
Year 1. Recurring implementation costs are incurred over the first 5
years since the Department has estimated it will take five years for
the universe of covered contracts to become ``new.'' Recurring
administrative costs accrue in all years. The annual administrative
cost increases until Year 5 because the number of affected employees
increases during this period. After Year 5, recurring administrative
costs level off, with only a small increase over time to reflect
employment growth.
When estimating projected costs the Department employed the same
method used for Year 1 but used projected numbers of affected
employees. The employment growth rate was calculated as the geometric
annual growth rate based on the ten-year employment projection for 2014
to 2024 from BLS' Employment Projections program. Real wages for human
resource managers and human resources assistants (except payroll and
timekeeping) were assumed to remain constant over this ten-year period.
Table 11--Direct Employer Costs in Years 1 Through 10
[Millions of 2015$]
----------------------------------------------------------------------------------------------------------------
Initial Recurring Recurring
Year/discount rate Regulatory implementation implementation administrative Total
famil. costs costs costs \a\ costs
----------------------------------------------------------------------------------------------------------------
Years 1 through 10
----------------------------------------------------------------------------------------------------------------
Year 1.......................... $80.4 $36.5 $6.1 $2.0 $125.0
Year 2.......................... 0.0 0.0 6.4 4.2 10.5
Year 3.......................... 0.0 0.0 6.4 6.3 12.7
Year 4.......................... 0.0 0.0 6.4 8.4 14.8
Year 5.......................... 0.0 0.0 6.4 10.5 16.9
Year 6.......................... 0.0 0.0 0.0 10.6 10.6
Year 7.......................... 0.0 0.0 0.0 10.7 10.7
Year 8.......................... 0.0 0.0 0.0 10.8 10.8
Year 9.......................... 0.0 0.0 0.0 10.9 10.9
Year 10......................... 0.0 0.0 0.0 11.0 11.0
----------------------------------------------------------------------------------------------------------------
Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate................ 9.2 4.2 3.4 8.3 25.0
7% discount rate................ 10.7 4.9 3.7 8.0 27.3
----------------------------------------------------------------------------------------------------------------
\a\ Recurring implementation costs are incurred for the first 5 years as since the Department has estimated it
will take five years for the universe of possibly covered contracts to become ``new.''
5. Other Potential Costs
In addition to the costs discussed above, there may be additional
costs that have not been quantified. These include the following
potential costs included in the NPRM: Costs to consumers, reduced
production, and replacement costs. Based on similar rules in states and
municipalities, the Department expects these costs to be small.\69\
After discussing these costs we then discuss additional costs mentioned
by commenters, including: Costs to seasonal businesses, reduced
profits, reduced benefits, bonuses, or wages, reduced employment,
absenteeism, and competitive disadvantage.
---------------------------------------------------------------------------
\69\ See: http://www.dol.gov/featured/PaidLeave/get-the-facts-sicktime.pdf.
---------------------------------------------------------------------------
Consumer Costs
The relevant consumer is the Federal government. If the rulemaking
increases employers' costs, and contractors pass along part or all of
the increased cost to the government, in the form of higher contract
prices, then government expenditures may rise (though, as discussed
later, benefits of the Executive Order are expected to accompany any
such increase in expenditures). Because direct costs to employers and
transfers are relatively small compared to Federal covered contract
expenditures, the Department believes that any potential increase in
contract prices will be negligible. In FY2015, Federal expenditures for
covered contracting service firms were $286.4 billion (Table 3).
Employer costs and transfers (estimated below) in Year 5 (the year when
all employees are affected) are estimated to be $473.6 million.
Therefore, employer costs are 0.17
[[Page 67688]]
percent of contracting revenue (assuming no growth in contracting
expenditures and without accounting for the benefits of the Final
Rule).
Concerning prices, the National Roofing Contractors Association
wrote that paid sick leave costs ``must be factored into the bids
submitted for any federal contract and will add further to the already
high degree of uncertainty to the bidding process.'' MCAA believes
firms will ``have to add high price contingencies to their bids or
proposals to cover these new contingent risks.'' However, a study of
Connecticut's paid sick leave law, cited by many commenters, found only
15.5 percent of employers reported increased prices.\70\ Similarly, in
San Francisco 10.9 percent of firms raised prices in response to paid
sick leave.\71\ Therefore, there is some evidence that increased costs
will be passed on to the government in higher contract prices. However,
the Department expects this price increase to be low because evidence
shows a minority of firms raised prices and the cost of the rulemaking
is a very small share of these firms' revenues.
---------------------------------------------------------------------------
\70\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\71\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employers and Employees. Institute for
Women's Policy Research.
---------------------------------------------------------------------------
Some commenters believe this rulemaking will reduce the efficiency
of government contracting by increasing government contract prices or
stifling competition. Roffman Horvitz PLC wrote ``[t]he proposed
regulation creates additional overhead contract costs that new
government contractors simply cannot bear to absorb, creating further
barriers to entry in the market.'' The National Roofing Contractors
Association spoke with members who reported ``they would consider not
bidding at all on federal contracts'' due to this rulemaking.
Conversely, the Washington Center for Equitable Growth cited research
evaluating Washington, DC's Accrued Sick and Safe Leave Act of 2008
that found that ``[i]n 2013, the Office of the District of Columbia
Auditor looked at the effects of the requirement and found no evidence
that businesses opted to leave Washington or that it prevented new
business formation in the District.'' 72 73 In order for
competition to be stifled, costs would have to increase (and outweigh
benefits) and not be passed along to the government. As noted above, we
believe costs will be small on average and will be accompanied by
benefits, and some costs will be passed along to the government,
leaving little reason to restrain the vast majority of bidders.
---------------------------------------------------------------------------
\72\ Branche, Y. (2013). Audit of the Accrued Sick and Safe
Leave Act of 2008. Washington, DC: Office of the District of
Colombia Auditor. Available at: http://dcauditor.org/sites/default/files/DCA092013.pdf.
\73\ Impacts of this rule may differ from DC because this law
may result in employers having to distinguish between covered and
non-covered workers. Additionally, the DC law required less paid
sick leave, one hour for every 37 to 87 hours, depending on the size
of the firm.
---------------------------------------------------------------------------
Production Costs
If the number of days of sick leave taken remains unchanged by the
Final Rule, then production should not be affected by the rule.
However, employees may take more sick days if the number of compensated
sick days available increases or the scope of eligible reasons to take
sick leave broadens; it is via this path that the Final Rule might
result in production costs to employers. There is evidence that workers
may take additional days of leave under this rulemaking.\74\
---------------------------------------------------------------------------
\74\ Data suggest that workers may take more sick leave when it
is paid. Using the ATUS 2011 Leave Module, the Department estimated
workers with paid sick leave take on average an additional 2.3 hours
of sick leave annually. Using the NHIS the Department found workers
with paid sick leave took on average 0.77 more days of sick leave.
Workers who already have paid sick leave may also expand their usage
because of the additional uses allowed under this rulemaking and the
provisions to prevent retaliation.
---------------------------------------------------------------------------
If these additional hours are not covered by a replacement worker,
then the employer incurs costs associated with this lost production and
the employee receives benefits associated with the paid sick leave
(expressed as a transfer from employer to employee in this rule).
Payroll remains the same but the worker's production is lost. If a
worker's productivity is equal to his or her wage, then the cost is
equivalent to income paid to the worker in wages while on sick leave.
If employers bring in workers to cover these lost hours of
production, then the additional cost (i.e., the replacement worker's
wages) is offset because the employer does not lose the production
attributed to the sick worker. In both cases, the employer incurs net
costs equivalent to one worker's wage or productivity; either the
employer pays the sick worker, but loses the sick worker's
productivity, or the employer pays both the sick worker and the
replacement worker, but does not lose the sick worker's productivity.
In both cases, costs and benefits should offset each other, to the
extent that workers are paid according to their marginal productivity,
and the productivity of the replacement worker matches that of the
original worker. Although these assumptions are not likely to be
exactly met, conceptually small deviations from the assumptions should
result in only small deviations of net costs or benefits. In addition,
there are no data available on which to estimate these net costs or
benefits.
Replacement Costs
As demonstrated above, if the worker who takes sick leave is
temporarily replaced by another worker, the marginal payroll cost of
the additional worker is offset by the productivity of the replacement
worker. Therefore, the Department estimates there will be very few
additional costs associated with bringing in workers to cover work
normally performed by workers on sick leave (in addition to the cost of
paying the sick worker). However, there are four channels through which
additional costs may be incurred if firms bring in replacement workers.
These all stem from the assumption that workers take more leave when
paid sick leave is provided. These costs will depend on whether firms
hire new workers or reschedule current workers.
First, there are managerial costs associated with rescheduling;
these are included in administrative costs. Second, if replacement
workers are hired, then there may be associated hiring costs. The
Department expects this cost to be small. A 2010 survey of employers
providing paid sick days in San Francisco found 8.4 percent reported
``always'' or ``frequently'' hiring a replacement for a sick worker and
23.6 percent saying they ``rarely'' hire replacement workers.\75\
Third, if other workers are scheduled at their overtime wage rate, then
there may be some additional cost associated with the overtime premium.
Once again, the Department expects this cost to be small. Many
commenters cited a study of Connecticut's paid sick leave law that
found 13.7 percent of employers had other workers work overtime to
cover absences as the primary method of covering absences.\76\ Fourth,
if the replacement worker is paid the same amount as the absent worker
but is less productive, then there may be some production costs.
---------------------------------------------------------------------------
\75\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employers and Employees. Institute for
Women's Policy Research.
\76\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Page 11. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------
Some commenters disagreed with the Department's analysis in the
previous
[[Page 67689]]
paragraph as it was depicted in the NPRM. For example, the National
Roofing Contractors Association asserted that the Department's
assumption means that a replacement worker would have to do the job of
two people for this rationale to make sense. This was not an assumption
made by the Department. The point of the discussion in the NPRM and
above is that if an employer pays another worker to replace the sick
worker, that employer does not incur any costs in addition to the
transfers accounted for elsewhere in the Regulatory Impact Analysis
section.
Reduced Profits
Some commenters argued profits will be hurt. However, after the
Seattle law took effect a majority of employers reported profitability
was unchanged.\77\ The Institute for Women's Policy Research cited the
2011 IWPR report on San Francisco's Paid Sick Leave Ordinance, which
found that ``Six of seven employers reported no negative effect on
profitability after the law's implementation.'' \78\ In part, this may
be because costs were passed through to consumers or wages or other
benefits to workers were reduced. However, the same survey found that
only 10.9 percent of firms raised prices (as discussed above) and
``[s]ix out of seven workers reported that their employer did not
reduce raises, bonuses, or other benefits to implement'' (benefits,
bonuses, and wages are discussed below).\79\ Therefore, it seems
employers make adjustments through multiple channels to account for any
increased costs.
---------------------------------------------------------------------------
\77\ Romich, J., et al. (2014). Implementation and Early
Outcomes of the City of Seattle Paid Sick and Safe Time Ordinance.
University of Washington. Available at: http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
\78\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employers and Employees. Institute for
Women's Policy Research.
\79\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employers and Employees. Institute for
Women's Policy Research.
---------------------------------------------------------------------------
Reduction in Benefits, Bonuses, and Wages
Some commenters believe this benefit would be offset by reductions
in other benefits, bonuses, or pay. A commenter from New Jersey wrote
that requiring paid sick leave will ``force them to look at
alternatives to reduce other costs--reduce vacation eligibility or
other types of benefits OR reducing staff or hours worked.'' We believe
these impacts will be negligible. A study of Connecticut's paid sick
leave law found only one percent of establishments reduced wages within
the time period of the analysis.\80\ And as noted in the survey
discussed above, according to workers, employers generally did not
reduce benefits, raises, or bonuses as a result of the San Francisco
Ordinance.
---------------------------------------------------------------------------
\80\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Page 13. Available at: http://cepr.net/documents/good-for-buisness-2014-&-02-21.pdf.
---------------------------------------------------------------------------
Reduction in Employment
Some commenters believe this benefit will hurt employment or hours.
One small business owner believes this rule will cause lay-offs. A
manager of a seasonal recreational business believes the increased
costs will result in employment cuts, in particular for youth. The
Department believes any impact on employment will be small due to case
studies of paid sick leave and the small size of costs relative to
these contractors' payroll and revenue. For example, a study of
Connecticut's paid sick leave law found that approximately 90 percent
of employers did not reduce employee hours.\81\ Furthermore, in
Seattle, job growth was stronger in 2013 after the Ordinance went into
effect than it was in the first part of 2012. The Department does,
however, account for some decreased hours in the model in the DWL
calculation (section V.C.iv.).\82\
---------------------------------------------------------------------------
\81\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Page 13. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\82\ Main Street Alliance of Washington. (2013). Paid Sick Days
and the Seattle Economy: Job Growth and Business Formation at the 1-
year Anniversary of Seattle's Paid Sick and Safe Leave Law.
Available at: http://www.seattle.gov/Documents/Departments/CivilRights/psst-report-main_street_alliance.pdf.
---------------------------------------------------------------------------
Work Absences
Some commenters expressed concern that the rulemaking will increase
workers' absences. This is especially a concern to employers when the
absences are considered abuse of the policy. AGC asserted its member
contractors working in Massachusetts have noticed questionable uses of
paid sick leave since the state adopted a paid leave mandate. They also
cited research by Ahn and Yelowitz (2016) \83\ showing that paid sick
leave increases absenteeism by 1.2 days a year.\84\ They also noted
that absenteeism in the construction industry causes unique challenges
because cost and schedule concerns are highly dependent on labor
productivity. This issue is discussed in more detail in section
V.C.vii.
---------------------------------------------------------------------------
\83\ Ahn, T. and Yelowitz, A. (2016). Paid Sick Leave and
Absenteeism: The First Evidence from the U.S. Available at: http://ssrn.com/abstract=2740366.
\84\ The authors measure ``absenteeism'' as the amount of sick
leave taken from one's job, regardless of the reason. The Department
chose to not use this result to calculate quantitative estimates of
impacts for various reasons, including that the estimate is based on
administrative workers and thus may not be applicable to all
workers.
---------------------------------------------------------------------------
The Department agrees the rulemaking will likely increase days away
from the office because workers may stay home more often when sick or
to care for sick family members. This is an intended result of the
rulemaking, and the Department expects the benefits from increased
access to paid sick leave to partially offset increased costs.
Moreover, there is little evidence of employees abusing paid sick
leave.
According to a study of Connecticut's paid sick leave law, managers
commented that ``the level of abuse was not only low, but [had] not
changed at all after the state law's implementation.'' \85\ The
Department also believes abuse is uncommon because most workers with
paid sick leave do not take all of their paid sick days and a
significant portion of workers do not take any paid sick leave.\86\
---------------------------------------------------------------------------
\85\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\86\ Based on tabulations of the 2014 NHIS, the Department
estimated that 46.9 percent of workers with paid sick leave do not
take any sick leave in a year.
---------------------------------------------------------------------------
Competitive Disadvantage
According to the American Benefits Council:
Providing mandatory paid leave will increase costs of doing
business, but the requirements--and increased costs--apply only to
those businesses providing services to the federal government. A
business operating in a federal building must provide the paid
leave; its competitor down the street need not. This puts the
business in the federal building at a financial disadvantage. It
cannot simply request that the government pay for the increased
costs. In these types of contracts, the contractor remits a portion
of its proceeds to the government. The federal building business can
increase its prices (although some contracts with the government
limit the business's ability to do so) and hope that the price
increase does not drive customers away. The federal building
business can cut costs in other ways--decreasing staffing levels or
reducing service options. Or, the federal building business can
decide to cease operating in a federal building.
[[Page 67690]]
The Department reiterates that the costs of this Final Rule are
expected to be small relative to payroll and revenue. Therefore, even
if the contractor incurs additional costs they should be incorporated
by small adjustments to prices, profits, wages, or hours (as discussed
above). Additionally, because the Final Rule only applies to new
contracts, the bidder can potentially restructure its contractual
relationship in order to be able to incur the potentially higher costs
without making these adjustments. The Department believes contractors
will find the most efficient combination of adjustments.
The Chamber/IFA considered competitive disadvantage from a
different angle: ``The proposed rule may raise costs for contractors
who need to create new or modify existing paid sick leave programs and
put them at a contract bidding disadvantage compared to firms that
already have such plans in place.'' However, it is the contractor who
may presently avoid the costs of providing sick leave to employees that
has a competitive advantage; requiring contractors to provide paid sick
leave removes that advantage. Indeed, as the U.S. Women's Chamber of
Commerce commented: ``Requiring more businesses to provide paid sick
leave will help level the playing field for those business owners who
are doing the right thing for their workers.''
DLA Piper asked whether the Department considered the impact of the
proposed rule on commercial item contractors and barriers to
participation. As an initial matter, the Department recognizes that
some commercial items contracts may be covered by the Executive Order
and part 13 because they cover contracts covered by the SCA, which may
apply in certain circumstances to contracts for commercial services.
See, e.g., 48 CFR 52.212-5(c). However, a significant portion of
commercial items contracts will not be covered by the Order and part
13. First, the paid sick leave requirements do not apply to commercial
supply contracts subject to the Walsh-Healey Public Contracts Act.
Second, unless covered under one of the other contract categories in
the Order (such as concession contracts), the Final Rule will not apply
to contracts for services that are specifically exempted from coverage
under the SCA, including those commercial services listed in 29 CFR
4.123(e). For the reasons discussed above, the Department's conclusions
regarding the benefits and costs associated with other contractors
implementing the Order are similarly applicable to any commercial items
contracts subject to the Order and this Final Rule.
iii. Transfer Payments
1. Calculating Transfer Payments
To calculate transfer payments, the Department has assumed solely
for purposes of discussion and ease of presentation that no offsetting
cost- and productivity-related benefits will be realized as a result of
the Executive Order and this Final Rule. As discussed in section
V.C.v., however, numerous benefits of providing paid sick leave under
the Executive Order can be expected to accompany the transfer payments
and other costs discussed above.
The most important factor in determining transfer payments is the
number of additional days of paid sick leave for which employees will
be compensated. In order to estimate transfer payments the Department
needed to:
Assign a monetary value to these days of paid sick leave
taken; and
Determine what share of the additional 968,000 days of
paid sick leave accrued (calculated above in section V.B.iv.) will be
taken.
The Final Rule requires contractors to provide an employee the same
pay and benefits for hours of paid sick leave used that the employee
would have received had he been working. Thus, the Department needed to
estimate both a base hourly wage for affected employees and a base
hourly benefit rate. The Department assumed an 8-hour work day to place
a monetary value on the transfer payment associated with a day of paid
sick leave used. The Department used data from the 2015 CPS to estimate
base hourly wage rates by industry and full-time status. The SCA
nationwide fringe benefit rate, which applies to most contracts covered
by the SCA, currently is $4.27 per hour. Because many of the contracts
covered by the Executive Order will be subject to the SCA, and many
employees performing on or in connection with contracts covered by the
Executive Order but not covered by the SCA will nonetheless be
performing service-related work similar in character to work performed
by SCA-covered service employees, the Department estimated that most
affected employees will average a base hourly benefit rate of $4.27.
The exception is the construction industry, for which the Department
used the benefits to wage ratio from the ECEC for the construction
industry (1.45) because employees in the construction industry will be
performing on or in connection with DBA contracts rather than SCA
contracts.\87\
---------------------------------------------------------------------------
\87\ For full-time construction workers benefits are estimated
to be $10.06 per hour (45 percent of $22.47). For part-time
construction workers benefits are estimated to be $7.94 per hour (45
percent of $17.74).
---------------------------------------------------------------------------
Although the Executive Order will allow employees to accrue up to
56 hours of paid sick leave annually, many employees will not use all
paid sick leave that they accrue (and many others will not work a
sufficient number of hours on covered contracts to accrue 56 hours of
paid sick leave in an accrual year). If employees take less than the
full amount of paid sick leave accrued, then transfer payments should
include only some of the additional days accrued. The Department
expects employees on average to use fewer days than allocated. To
estimate the share of accrued days employees will use, the Department
used data from the 2015 NCS and ECEC by industry (provided by the BLS
and reported in Table 12). While the numbers vary by industry, over all
industries employees with paid sick leave take an average of 4 days of
sick leave annually.\88\ Employees with access to a fixed number of
paid sick leave days per year accrued an average of 8 days annually.
Dividing the average days of paid sick leave taken by the average days
of paid sick leave accrued annually, the Department estimated that
employees use on average 50 percent of days allotted. This may be an
overestimate in Year 1 when employees may have fewer days available
since they will not start to accrue paid sick leave until they commence
work on a covered contract, nor will they carry over any days from the
previous year.\89\ This could also be an underestimate because the
additional uses allowed under this rulemaking and the provisions to
prevent retaliation, may result in expanded use for employees who
already have paid sick leave.
---------------------------------------------------------------------------
\88\ BLS calculated this using the ECEC data based on workers in
paid sick leave plans where a cost was incurred by the employer in
the reference period.
\89\ This assumes employees with sick leave in the NCS are
allowed to carry over sick days. The larger the share of these
employees without carryover privileges, the more appropriate the
number is for Year 1 and the less appropriate it is for future
years.
---------------------------------------------------------------------------
Case studies demonstrate that not all paid sick days will be taken.
In a comment by the Institute for Women's Policy Research, the
organization cited the 2011 IWPR report on San Francisco's Paid Sick
Leave Ordinance that found that the average worker used only three paid
sick days per year and 25 percent used no paid sick days at all.\90\
---------------------------------------------------------------------------
\90\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employers and Employees. Institute for
Women's Policy Research.
[[Page 67691]]
Table 12--Ratio of Days of Sick Leave Available That Are Taken
----------------------------------------------------------------------------------------------------------------
Average number of days \a\ Total additional days of paid
-------------------------------- Ratio of days sick leave
Industry available -------------------------------
Available Taken taken Available Taken
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing .............. .............. 0.50 349 174
\b\............................
Mining.......................... 27 2 0.07 162 12
Utilities....................... 21 6 0.29 1,823 521
Construction.................... 6 2 0.33 111,849 37,283
Manufacturing................... 8 3 0.38 29,961 11,235
Wholesale trade................. 8 3 0.38 526 197
Retail trade.................... 6 2 0.33 70,740 23,580
Transportation and warehousing.. 9 4 0.44 70,509 31,337
Information..................... 9 4 0.44 7,231 3,214
Finance and insurance........... 12 5 0.42 9,130 3,804
Real estate and rental and 6 4 0.67 376 251
leasing........................
Professional, scientific, and... 8 4 0.50 254,562 127,281
Management of companies and..... 12 4 0.33 0 0
Administrative and waste 8 2 0.25 263,752 65,938
services.......................
Educational services............ 11 5 0.45 10,488 4,767
Health care and social 8 4 0.50 79,304 39,652
assistance.....................
Arts, entertainment, and 6 3 0.50 9,231 4,616
recreation.....................
Accommodation and food services. 6 2 0.33 39,016 13,005
Other services.................. 8 3 0.38 9,007 3,378
-------------------------------------------------------------------------------
Total private \c\........... 8 4 0.50 968,017 370,246
----------------------------------------------------------------------------------------------------------------
\a\ For this Final Rule the BLS provided this breakdown using NCS and ECEC data for industries with sufficient
observations to meet their publication criteria.
\b\ NCS does not include information for this industry. Used average across all private employees.
\c\ Total additional days of paid sick leave taken is not equal to the number of paid sick leave days available
multiplied by the share of 50 percent. This is because the analysis was conducted at the industry level and
days were aggregated to estimate the total. Due to rounding by the BLS of the number of days, the aggregated
total number of days taken and the total using aggregated number of days available and taken differ.
Therefore, of the 968,000 days of additional paid sick leave
accrued, 370,200 days are estimated to be taken and result in transfer
payments (see Table 12). Using wage data by industry results in Year 1
transfer payments of $85.5 million (Table 13). This is 0.03 percent of
revenue from Federal contracts for these contractors (since many
covered contractors garner revenue from private work, the transfer
payment estimate is almost certainly a lower percentage of their total
revenues). If all days of paid sick leave were used, transfers would be
$214.4 million in Year 1 or 0.07 percent of Federal contracting
revenues.
Table 13--Transfer Payments in Year 1
----------------------------------------------------------------------------------------------------------------
Transfer as
Covered share of
Industry NAICS Transfer contracting contracting
($1,000s) revenue revenue
(millions) \a\ (percent)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and.............. 11 $28 $339 0.01
Mining.......................................... 21 3 105 0.00
Utilities....................................... 22 142 3,043 0.00
Construction.................................... 23 9,565 24,194 0.04
Manufacturing................................... 31-33 2,558 20,703 0.01
Wholesale trade................................. 42 44 254 0.02
Retail trade.................................... 44-45 3,869 1,263 0.31
Transportation and warehousing.................. 48-49 6,501 11,005 0.06
Information..................................... 51 793 8,146 0.01
Finance and insurance........................... 52 981 18,734 0.01
Real estate and rental and leasing.............. 53 55 1,174 0.00
Professional, scientific, and................... 54 36,531 136,870 0.03
Management of companies and..................... 55 0 0 0.01
Administrative and waste services............... 56 11,660 29,781 0.04
Educational services............................ 61 1,040 4,290 0.02
Health care and social assistance............... 62 8,438 22,845 0.04
Arts, entertainment, and recreation............. 71 816 103 0.79
Accommodation and food services................. 72 1,870 1,161 0.16
Other services.................................. 81 615 2,387 0.03
---------------------------------------------------------------
[[Page 67692]]
Total private............................... .............. 85,508 286,396 0.03
----------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov. Contracting expenditures for covered contracts.
To estimate transfers beyond year 1, the Department projected
employment and wage growth. The employment growth rate was calculated
as the geometric annual growth rate based on the ten-year employment
projection for 2014 to 2024 from BLS' (as discussed in section
V.B.iv.). The Department calculated the average annual geometric growth
rate in median nominal wages from CPS data between 2005 and 2015. The
geometric growth rate is the constant annual growth rate that when
compounded yields the last historical year's wage. The CPI-U was then
used to convert this nominal growth rate to a real growth rate.
The real growth rate for benefit payments was calculated using the
geometric growth rate in nominal SCA benefit rates between 2006 and
2015 and converted to a real rate using the CPI-U.\91\ For projected
transfers the Department employed the same method used for Year 1 but
used the projected number of employees and wages. Table 14 shows
projected transfers through Year 10. It also contains average
annualized transfers using both 3 percent and 7 percent discount rates.
---------------------------------------------------------------------------
\91\ The Department calculated how estimates would change if we
used the GDP deflator instead of the CPI-U to adjust wages and
benefits. The differences are small. Average annualized transfers
would increase by 0.89% from $349.6 million to $352.7 (costs would
not change).
---------------------------------------------------------------------------
If some contracts last longer than 5 years, then not all contracts
will be covered by Year 5 and transfers will accrue more slowly. In
general, the Department believes most contracts will renew within five
years but notes that some contracts, such as contracts for concessions
and operations on federal lands may last longer than five years.
Table 14--Transfers in Years 1 Through 10
------------------------------------------------------------------------
Transfers
Year/discount rate (millions of
2015$)
------------------------------------------------------------------------
Years 1 through 10
------------------------------------------------------------------------
Year 1.................................................. $85.5
Year 2.................................................. 176.2
Year 3.................................................. 268.3
Year 4.................................................. 361.8
Year 5.................................................. 456.7
Year 6.................................................. 464.4
Year 7.................................................. 472.2
Year 8.................................................. 480.2
Year 9.................................................. 488.4
Year 10................................................. 496.8
------------------------------------------------------------------------
Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................ 364.1
7% discount rate........................................ 349.6
------------------------------------------------------------------------
2. Additional Considerations
The Department based its method of calculating transfers on the
number of employees working exclusively on Federal contracts. To the
extent that Federal contract work is split between employees, these
transfer estimates may be over- or underestimates. The current method
attributes all hours worked on a Federal contract to one employee. For
example, if that employee currently receives five paid sick leave days
per year, he or she would receive a transfer of two additional days of
paid sick leave. If instead half this work was completed by one
employee and half by another employee, the Executive Order would
require that each receive 3.5 sick days per year; however, since each
employee already receives 5 days of paid sick leave, there would be no
incremental transfer. The Department estimated that the maximum size of
the overestimate due to the assumption of employees working exclusively
on Federal contracts is $27.0 million in Year 1 (31.6 percent of the
$85.5 million in total transfers).\92\ Conversely, if this work is
spread across multiple employees, and these employees currently do not
receive any paid sick leave, and the propensity to take the paid sick
leave diminishes with the number of days, then this methodology could
result in an underestimate of transfers.
---------------------------------------------------------------------------
\92\ The maximum possible overestimate was calculated by
eliminating transfers associated with employees who currently
receive any paid sick leave.
---------------------------------------------------------------------------
Another consideration is that some of the transfers may be reduced
by employer responses to the rule. Employers may reduce vacation time,
reduce wages, or increase health insurance premiums in order to
diminish some of their increased costs. (These outcomes may be unlikely
in the short run due to stickiness of compensation.) Employers may also
reallocate days of leave to keep total benefits the same. For example,
an employer that used to provide 5 sick days and 5 vacation days could
now provide 5 sick days, 3 vacation days, and 2 days that can be used
for any purpose. This would leave exactly zero employer-employee
transfer because an employee could take 7 days paid sick leave if
necessary but could still only take a maximum of 5 days of vacation.
(Provided the policy met the requirements of section 2 of the Order and
this Final Rule and employees could use accrued paid sick leave and the
2 ``any-purpose'' days for the same purposes and under the same
conditions as described in the Order and this Final Rule, the employer
would be in compliance and transfers would be zero).
Some commenters expressed concern that because monitoring hours
worked on Federal contracts will be very burdensome employers may
provide paid sick leave to all workers for all hours worked in order to
reduce the monitoring costs. For example, the ERISA Industry Committee
asserted that many large employers are likely to apply the Executive
Order's requirements to a larger group than what is mandated by the
Executive Order to reduce the risk of excluding covered employees.
However, benefits potentially provided to workers on non-covered
contracts are not quantified.
Transfer payments were calculated assuming paid sick leave is
accrued for all 52 weeks of the year. If workers take paid sick leave
or other leave, and do not accrue hours while on leave, then transfers
may be slightly lower. The impact for full-time employees will be
negligible. An employee who works 40
[[Page 67693]]
hours per week will reach the 56 hour cap after 42 weeks of work.
Therefore, they will reach the cap regardless of whether paid sick
leave is accrued while on leave. For part-time employees, hours of
accrual are slightly overestimated. For example, an employee who works
25 hours per week will accrue 43.3 hours of paid sick leave annually
(assuming no leave). If this worker takes a week of sick leave, and
paid sick leave is not accrued during this week, then they will accrue
0.8 fewer hours of paid sick leave (25/30). If this worker also took
two weeks of vacation, they would accrue 1.7 fewer hours of paid sick
leave ((25 x 2)/30).
iv. Deadweight Loss
Deadweight loss (DWL) occurs when a market operates at less than
optimal equilibrium output. This typically results from an intervention
that sets, in the case of a labor market, compensation above the
equilibrium level.\93\ The higher cost of labor leads to a decrease in
the total number of labor hours that are purchased on the market. DWL
is a function of the difference between the compensation the employers
were willing to pay for the hours lost and the compensation employees
were willing to take for those hours. In other words, DWL represents
the total loss in economic surplus resulting from a ``wedge'' between
the employer's willingness to pay and the employee's willingness to
accept work arising from the Final Rule. DWL may vary in magnitude
depending on market parameters, but it is typically small when wage
changes are small or when labor supply and labor demand are relatively
inelastic with respect to compensation.
---------------------------------------------------------------------------
\93\ The estimate of DWL assumes the market meets the
theoretical conditions for an efficient market in the absence of
this intervention (e.g., all conditions of a perfectly competitive
market hold: Full information, no barriers to entry, etc.). Since
labor markets are generally not perfectly competitive, this estimate
is necessarily imprecise.
---------------------------------------------------------------------------
The DWL resulting from this Final Rule was estimated based on the
average decrease in hours worked and increase in average hourly
compensation (again, without accounting for offsetting benefits of the
Executive Order and the Final Rule). As the cost of labor rises due to
the requirement to pay sick leave, the quantity of labor demanded
decreases, which results in fewer hours worked. To calculate the DWL,
the annual increase in compensation (i.e., transfers per worker) was
divided by the total number of hours worked to estimate the average
hourly increase in compensation.\94\ Using the estimated percent change
in compensation and the elasticity of labor demand with respect to wage
(as a proxy for compensation), the Department estimated the percent
decrease in average hours per employee.\95\ To estimate the percent
decrease in average hourly wages associated with labor supply, the
Department used the decrease in average hours per employee and the
elasticity of labor supply with respect to wage (again, as a proxy for
compensation).\96\
---------------------------------------------------------------------------
\94\ For the purposes of the DWL calculation, we treat the
increase in employee benefits resulting from the paid leave
requirement as if it were equivalent to an increase in employees'
hourly wage. This is necessary because the parameters needed to
evaluate the DWL (i.e., the wage elasticities) are expressed
strictly in terms of wages. However, to the extent that employers
may replace (``crowd out'') some of their employees' wages with the
required paid sick benefit, this will result in an overestimate of
DWL. (It may also change the nature of the DWL in ways not captured
by this numerical analysis.)
\95\ An elasticity of -0.2 was used based on the Department's
analysis of Lichter, A., Peichl, A., and Siegloch, A. (2014). The
Own-Wage Elasticity of Labor Demand: A Meta-Regression Analysis. IZA
DP No. 7958.
\96\ An elasticity of 0.15 was used based on a literature review
and specifically results from Bargain, O., Orsini, K., and Peichl,
A. (2011). Labor Supply Elasticities in Europe and the US. IZA DP
No. 5820.
---------------------------------------------------------------------------
Using these values the Department calculated DWL per affected
employee (Table 15). This was multiplied by the number of affected
employees to estimate total DWL; $182,900 in Year 1. Projected DWL is
shown in Table 16. Average annualized DWL during the first ten years
the rule is in effect is estimated to be $734,500.
Table 15--Deadweight Loss Calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent change in wage
Average from base \a\ Average Percent DWL per
Industry base hourly -------------------------- annual change in affected Affected Total DWL
wage Change in Change in hours per hours employee employees
Ld wage Ls wage employee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ag., forestry, fish. and hunting................ $15.96 1.48 -1.98 2,182 -0.30 $1.79 58 $104
Mining.......................................... 28.79 0.12 -0.16 2,473 -0.02 0.02 39 1
Utilities....................................... 29.67 0.75 -1.00 2,172 -0.15 0.84 294 247
Construction.................................... 22.06 1.01 -1.35 2,126 -0.20 1.12 20,280 22,728
Manufacturing................................... 24.16 0.78 -1.04 2,157 -0.16 0.74 6,372 4,718
Wholesale trade................................. 23.59 0.67 -0.89 2,151 -0.13 0.53 133 71
Retail trade.................................... 16.14 0.82 -1.10 1,804 -0.16 0.46 16,709 7,690
Transportation and warehousing.................. 21.56 0.90 -1.20 2,165 -0.18 0.89 15,609 13,826
Information..................................... 27.13 0.61 -0.82 1,971 -0.12 0.47 2,587 1,218
Finance and insurance........................... 28.10 0.69 -0.93 2,083 -0.14 0.66 2,484 1,636
Real estate and rental and leasing.............. 23.17 1.38 -1.85 1,949 -0.28 2.02 95 192
Prof., sci., and tech. services................. 31.73 0.83 -1.11 2,044 -0.17 1.05 72,713 76,026
Management of companies......................... 27.40 0.47 -0.62 2,104 -0.09 0.29 0 0
Administrative and waste services............... 17.67 0.68 -0.91 1,957 -0.14 0.37 50,648 18,913
Educational services............................ 22.78 1.26 -1.68 1,601 -0.25 1.36 2,456 3,329
Health care and social assistance............... 22.33 1.10 -1.47 1,877 -0.22 1.19 19,587 23,260
Arts, entertainment, and recreation............. 17.40 1.33 -1.77 1,680 -0.27 1.21 2,184 2,634
Accommodation and food services................. 13.52 1.08 -1.44 1,721 -0.22 0.63 7,718 4,889
Other services.................................. 18.33 0.95 -1.26 1,803 -0.19 0.69 2,092 1,451
-------------------------------------------------------------------------------------------------------
Total private............................... ........... ........... ........... ........... ........... ........... 222,059 182,934
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This is the change in the wage rate associated with the labor supply (Ls) or labor demand (Ld) curve and the new level of hours.
[[Page 67694]]
Table 16--DWL in Years 1 Through 10
------------------------------------------------------------------------
DWL (millions
Year/discount rate of 2015$)
------------------------------------------------------------------------
Years 1 through 10
------------------------------------------------------------------------
Year 1.................................................. $0.18
Year 2.................................................. 0.38
Year 3.................................................. 0.57
Year 4.................................................. 0.77
Year 5.................................................. 0.96
Year 6.................................................. 0.98
Year 7.................................................. 0.99
Year 8.................................................. 1.00
Year 9.................................................. 1.01
Year 10................................................. 1.03
------------------------------------------------------------------------
Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................ 0.76
7% discount rate........................................ 0.73
------------------------------------------------------------------------
v. Benefits
There are a variety of benefits associated with this rule; however,
due to data limitations these are not monetized. The following benefits
were discussed qualitatively in the NPRM: Improved employee health,
improved health of dependents, increased productivity, reduced hiring
costs, decreased healthcare expenditures, improved firm profits and
decreased government expenditures relative to what would be expected if
the rule's costs and transfer impacts were considered in isolation, and
job growth. The first part of this section considers these benefits and
related comments. The second part of this section considers benefits
discussed by commenters that were not included in the benefits section
of the NPRM RIA.
1. Benefits Discussed Qualitatively in the NPRM
Improved Employee Health
Multiple studies have shown that paid sick leave greatly reduces
the chance of employee injury and/or exposure to illness. When sick
employees attend their jobs, they engage in a practice known as
``presenteeism.'' Presenteeism is detrimental to productivity, and
increases the probability of workplace injury and illness, resulting in
greater employer and employee costs. In one study from the American
Journal of Public Health, which many commenters cited, researchers used
data from multiple industries (construction, retail, manufacturing,
health care, etc.) to show that employees with access to paid sick
leave were 28 percent less likely to incur a non-fatal work injury than
their counterparts without paid sick leave.\97\
---------------------------------------------------------------------------
\97\ Asfaw, A, Pana-Cryan, R., and Rosa, R. (2012). Paid Sick
Leave and Nonfatal Occupational Injuries. American Journal of Public
Health, 102(9), e59-e64.
---------------------------------------------------------------------------
In a similar study, data from the outbreak of the 2009 H1N1
pandemic showed that individuals who were not paid for absences had a
4.4 percentage point greater change of contracting an influenza-type
illness than those with sick leave pay (9.2 percent versus 13.6
percent; only the rate for workers without paid leave is statistically
significant at the 10 percent level).\98\ A study of Connecticut's paid
sick leave law, cited by many commenters, found 18.8 percent of
employers reported reduced presenteeism and 14.8 percent reported a
reduction in spread of illness.\99\
---------------------------------------------------------------------------
\98\ Kumar, S., Quinn, S.C., Kim, K.H., Daniel, L.H., and
Freimuth, V.S. (2011) The Impact of Workplace Policies and Other
Social Factors on Self-Reported Influenza-like Illness Incidence
During the 2009 H1N1 Pandemic. American Journal of Public Health,
102(1), 134-140.
\99\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------
Diminishing presenteeism by providing paid sick leave can be
expected to have positive impacts on employee health, as it would
reduce the possibility that sick employees could potentially expose
their colleagues to infection or disease. Studies have linked the
incidence of presenteeism to a lack of paid sick leave. For instance, a
2010 survey found that 37 percent of the working respondents who had
paid sick leave, had attended work with a contagious illness.\100\
Meanwhile, 55 percent of employees with no paid sick leave had attended
work with a contagious illness.\101\
---------------------------------------------------------------------------
\100\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitude
and Experiences. Public Welfare Foundation.
\101\ These proportions are suggestive of a difference between
employees with and without paid sick leave, but no standard errors
or sample sizes were provided to determine if these are
statistically significantly different proportions.
---------------------------------------------------------------------------
Many commenters discussed the health benefits of paid leave. In
particular, commenters stressed the reduction in the spreading of
contagious illnesses. The Iowa Main Street Alliance wrote: ``Our
businesses know that when employees stay home rather than reporting to
work sick, their co-workers and customers stay healthy. Preventing the
spread of illness in the workplace saves money.'' Many form letter
submissions cited studies demonstrating how paid sick leave reduces the
prevalence of presenteeism and prevents spreading illnesses. The first
is a national survey that found ``87 percent of employers reported that
employees had come to work with short-term, easily spread illnesses
such as a cold or the flu.'' \102\ The second reported that ``people
without paid sick time are 1.5 times more likely than people with paid
sick time to go to work with a contagious illness like the flu.'' \103\
The third examined Google flu data from 2003 to 2015 and found ``that
when workers gained access to paid sick days, the number of workers
going to work with contagious illnesses decreased, causing infection
rates to decrease by up to 20 percent.'' \104\
---------------------------------------------------------------------------
\102\ Wolters Kluwer Law & Business. (2008). On the Job, But Out
of It? CCH Survey Looks At Ill Effects of Sick Employees At Work.
Available at: http://www.cch.com/press/news/2008/20080110h.asp.
\103\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitudes
and Experiences. National Opinion Research Center at the University
of Chicago Publication.
\104\ Pichler, S., and Ziebarth, N.R. (2015). The Pros and Cons
of Sick Pay Schemes: Testing for Contagious Presenteeism and
Shirking Behavior. Deutsches Institut f[uuml]r Wirtschaftsforschung
Publication. Available at: http://www.diw.de/documents/publikationen/73/diw_01.c.514633.de/dp1509.pdf.
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Contagious illnesses in industries where employees interact with
the public may be especially problematic. One commenter in particular
mentioned the Chipotle Mexican Grill case.\105\ According to NELP,
``[t]he poultry industry receives hundreds of millions of dollars in
federal contracts . . . The lack of paid sick leave [in the industry],
and the widespread use of putative sick leave policies, often means
workers are required to choose between their health and their
employment. This has serious implications not only for workers, but may
also impact the safety of our food.'' \106\ NELP and the Nebraska
Appleseed Center for Law in the Public Interest cited a survey that
found 62 percent of workers reported they have gone to work while sick.
When asked why they had gone to work sick, 77 percent responded they
did not have paid sick leave and needed the money.\107\
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\105\ The commenter did not elaborate but for context, this
refers to sick employees attending work which led to two norovirus
outbreaks. For more information see: http://www.cnbc.com/2016/02/08/chipotle-blames-norovirus-outbreaks-on-sick-employees.html.
\106\ However, the Department notes that poultry industry
contracts with the Federal government may not be covered by this
rulemaking because it does not cover contracts for commercial items
subject to the Walsh-Healey Public Contracts Act.
\107\ Northwest Arkansas Workers' Justice Center. (2016). Wages
and Working Conditions in Arkansas Poultry Plants. Available at:
http://nwawjc.org/poultry-report/.
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[[Page 67695]]
Improved Health of Dependents
Another potential positive impact of the Final Rule is its indirect
effect on the health of an employee's dependents (particularly
children). Paid leave has a substantial impact on parents' ability to
care for sick children. One study, using the Baltimore Parenthood Study
and multivariate analysis, found parents with paid sick leave or
vacation leave were 5.2 times more likely to remain home to care for
their sick child.\108\ According to a study in San Francisco by the
Institute for Women's Policy Research, parents that did not have paid
sick leave were more than 20 percentage points more likely to send
their children to school while sick (75.9 compared with 53.8).\109\
This ``child presenteeism'' is problematic because these pupils have
the potential to expose other students and teachers to the illness,
decreasing others' health.
---------------------------------------------------------------------------
\108\ Heymann, S.J., Toomey, S., and Furstenberg, F. (1999)
Working Parents: What Factors are involved in Their Ability to Take
Time off from Work When Their Children Are Sick? Archives of
Pediatrics and Adolescent Medicine, 153(8): 870-874.
\109\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employees and Employers. Institute for
Women's Policy Research.
---------------------------------------------------------------------------
Commenters agreed. Legal Aid Society wrote: ``Parents' access to
paid sick days can positively impact their children's health and
academic success . . . Parents without access to paid sick days are 71%
more likely to send an ill child to school or child-care than those
parents with access to paid sick days.'' \110\ Legal Aid Society also
pointed out that: ``Sick children can have a significant effect on
spreading contagious illness. A study analyzing the spread of pandemic
influenza found that children and teenagers make up nearly 65% of those
responsible for infectious flu contacts.'' \111\ They also cited
research demonstrating that children recover better from illnesses and
injuries when their parents care for them.\112\
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\110\ Kim, J. and Smith, T.W. (2010). Paid Sick Days: Attitudes
and Experiences, National Opinion Research Center At The University
Of Chicago. Available at: http://news.uchicago.edu/static/newsengine/pdf/100621.paid.sick.leave.pdf.
\111\ Beyeler, W.E., Glass, L.M., and Glass, R.J. (2005).
National Infrastructure Simulation and Analysis Center, Sandia
National Laboratories, Local Mitigation Strategies for Pandemic
Influenza. Available at: http://www.sandia.gov/CasosEngineering/docs/FluMitigationPaperWithFullSOMTables.pdf.
\112\ Chung, P.J. and Schuster, M.A. (2014). Time Off to Care
for a Sick Child--Why Family-Leave Policies Matter. New England
Journal of Medicine, 37(493). Earle, A. and Heymann, J. (2010).
Raising The Global Floor: Dismantling The Myth That We Can't Afford
Good Working Conditions For Everyone.
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The ability to take sick leave to care for individuals equivalent
to a family relationship may be especially helpful in the LGBT
community. The Williams Institute at the UCLA School of Law noted the
rule ``would also allow employees to use paid sick leave to care for a
partner's children, even when the employee has no legally recognized
relationship to the children. This policy is particularly important for
LGBT people, who continue to experience unique barriers to establishing
parental status or legal custody of a partner's children.''
Increased Productivity
As noted earlier, the Department expects the costs of providing
paid sick leave under the Executive Order will be accompanied by its
benefits. The Department particularly anticipates that contractor costs
to provide paid leave will be accompanied by increased employee
productivity. This increased productivity will occur through numerous
channels, such as improved health, employee retention, and level of
effort. When workers attend work while sick they tend to have
diminished productivity. Goetzel et al. (2004) found that on-the-job
productivity loss due to sickness represented 18 percent to 60 percent
of employer costs associated with 10 health conditions.\113\
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\113\ Goetzel, R.Z., et al. (2004). Health, Absence, Disability,
and Presenteeism Cost Estimates of Certain Physical and Mental
Health Conditions Affecting U.S. Employers. JOEM, 46(4), 398-412.
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A strand of economic research, commonly referred to as ``efficiency
wage'' theory, considers how an increase in compensation may be met
with greater productivity.\114\ To the degree that the Final Rule
increases employee compensation it could yield some of the benefits
associated with efficiency wages.\115\ Efficiency wages may reduce
employer costs by reducing turnover, allowing workers to gain more
firm-specific human capital that enhances their productivity and
reducing the cost of replacing workers. Efficiency wages may also
elicit greater effort on the part of workers, making them more
effective on the job.\116\ A higher wage implies a larger cost of
losing one's job; employees will put in more effort in order to reduce
the risk of losing the job. This is commonly referred to as the
shirking model.\117\ Third, efficiency wages may attract higher-quality
applicants.
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\114\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
\115\ As we note elsewhere in this analysis, increased
compensation is not guaranteed for all affected workers because some
employers may respond to the paid sick leave requirement by reducing
other fringe benefits, such as paid vacation, or by decreasing base
wages.
\116\ Another model of efficiency wages, which is less
applicable here, is the adverse selection model in which higher
wages raise the quality of the pool of applicants.
\117\ Shapiro, C. and Stiglitz, J.E. (1984). Equilibrium
Unemployment as a Worker Discipline Device. The American Economic
Review, 74(3), 433-444.
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Providing paid sick leave to employees has been associated with
decreased job separations. In one 2013 study, the author showed that
paid sick leave is associated with a decrease in the probability of job
separation of 25 percent.\118\ Such a reduction in job separation would
increase marginal productivity because new employees have less firm-
specific capital (i.e., skills and knowledge that have productive value
in their particular company) and thus would require additional
supervision and training to match the productivity of former
workers.\119\ Other research supports the hypothesis that paid leave
encourages employees to remain at their respective companies. In a
survey of two hundred human resource managers, two-thirds cited family-
supportive policies as the single most important factor in attracting
and retaining employees.\120\ By providing paid sick leave, companies
may be able to reduce the firm's turnover rate and increase
productivity (and therefore reduce hiring costs, see the section on
reduced hiring costs below).
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\118\ Hill, H. (2013). Paid Sick Leave and Job Stability. Work
and Occupations, 40(2), 10.
\119\ Argote, L., Insko, C.A., Yovetich, N., and Romero, A.A.
(1995). Group Learning Curves: The Effects of Turnover and Task
Complexity on Group Performance. Journal of Applied Social
Psychology, 25(6), 512-529.
Shaw, J.D. (2011). Turnover Rates and Organizational
Performance: Review, Critique, and Research Agenda. Organizational
Psychology Review, 1(3), 187-213.
Dube, A., Lester, T.W., and Reich, M. (2013). Minimum Wage
Shocks, Employment Flows and Labor Market Frictions. IRLE Working
Paper #149-13.
\120\ Williams, J. (2001). Unbending Gender: Why Work and Family
Conflict and What to Do About It. Oxford University Press.
---------------------------------------------------------------------------
Commenters agreed that the rule will increase productivity. Many
form letter submissions cited studies demonstrating how paid sick leave
improves productivity. The first uses results from the American
Productivity Audit to estimate that presenteeism cost the economy
$206.6 billion in 2005 (after adjusting for inflation).\121\ The second
is
[[Page 67696]]
a survey of human resources executives that found ``38 percent reported
presenteeism being a problem in their organizations, and 69 percent
reported having paid sick time or other paid time off policies in place
as measures to prevent this problem.'' \122\ The third is a survey
showing that ``26 percent of workers without paid time off to see a
doctor reported having six or more days in which they were unable to
concentrate at work, compared to 17 percent of workers who had such
paid time off.'' \123\ The fourth demonstrates that paid sick days
``help workers recover and return to work more quickly: Nationally,
workers without paid sick days spent more days bedridden due to illness
than workers with paid sick days.'' \124\ The last showed that in
Jersey City, ``businesses that changed their policies to comply with
the law reported significant benefits, including a reduction in the
number of sick employees coming to work, [and] an increase in
productivity.'' \125\
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\121\ Stewart, W.F., Ricci, J.A., Chee, E., and Morganstein, D.
(2003). Lost Productive Work Time Costs from Health Conditions in
the United States: Results From the American Productivity Audit.
Journal of Occupational and Environmental Medicine, 45(12), 1234-
1246. (Unpublished calculation based on $226 billion annually in
lost productivity, 71 percent due to presenteeism.)
\122\ Wolters Kluwer Law & Business. (2008). On the Job, But Out
of It? CCH Survey Looks At Ill Effects of Sick Employees At Work.
Available at: http://www.cch.com/press/news/2008/20080110h.asp.
\123\ Davis, K., Collins, S.R., Doty, M.M., Ho, A., and
Holmgren, A.L. (2005). Issue Brief: Health and Productivity among
U.S. Workers. The Commonwealth Fund Publication. The Department
notes that this study does not provide information to determine
whether the point estimate of 26 percent is statistically
significantly higher than the 17 percentage point estimate.
\124\ Human Impact Partners. (2009). A Health Impact Assessment
of the Healthy Families Act of 2009. Available at: http://www.humanimpact.org/downloads/national-paid-sick-days-hia-report/.
\125\ Lindemann, D. and Britton, D. (2015). Earned Sick Days in
Jersey City: A Study of Employers and Employees at Year One. Center
for Women and Work at Rutgers, the State University of New Jersey
Publication. Available at: http://cww.rutgers.edu/sites/cww.rutgers.edu/files/documents/working_families/Jersey_City_ESD_Issue_Brief.pdf.
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Finally, productivity may increase due to the ability to attract
more productive employees. Many commenters cited the same Jersey City
study, which found that benefits to businesses that changed their
policy to adhere to the city's paid sick leave law experienced ``an
improvement in the quality of job applicants.''
Reduced Hiring Costs
By providing paid sick leave, employers may experience lower job
turnover, resulting in higher productivity and lower hiring costs, both
of which would positively impact profits (the benefit of increased
productivity was discussed above and profits are discussed below).
Multiple studies demonstrate an inverse relationship between sick leave
pay and employee turnover. One 2003 study from the University of
Michigan found that when employers in upstate New York implemented a
paid sick leave policy, they experienced modest reductions in employee
turnover.\126\ Lowering employee turnover reduces hiring costs,
boosting profitability. Various research shows that firms incur a
substantial cost for hiring new employees. A review of 27 case studies
found that the median cost of replacing an employee was 21 percent of
the employee's annual salary.\127\ These costs might be diminished by
incorporating paid sick leave into family friendly policies. Even
though marginal labor costs may rise when employers provide paid sick
leave, the Department expects the new, higher wages will be partially
offset by increased productivity, and reduced hiring and training
costs.
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\126\ Baughman, R., Holtz-Eakin, D. and DiNaridi, D. (2002).
Productivity and Wage Effects of ``Family-Friendly'' Fringe
Benefits. International Journal of Manpower, 24(3), 247-259.
\127\ Boushey, H. and Glynn, S. (2012). There are Significant
Business Costs to Replacing Employees. Center for American Progress.
Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
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The potential reduction in turnover is a function of several
variables: The current wage, hours worked, turnover rate, industry, and
occupation. Additionally, the estimated cost of replacing a separated
employee, and providing paid sick leave to an employee, varies
significantly based on factors such as industry and geographic
region.\128\ Therefore, quantifying the potential benefits associated
with a decrease in turnover attributed to this Final Rule would require
many sources of data and assumptions.
---------------------------------------------------------------------------
\128\ One 2008 study conducted by professors at San Francisco
State University showed that in California providing sick leave to
employees in the construction, retail, restaurant, and hotel
industries could increase employer's payroll costs by between $299
and $862 per employee annually. Potepan, M.J. (2008). Paid Sick
Leave: Access, Costs and Feasibility of Implementation at the State
Level. Sacramento State: Center for California Studies.
---------------------------------------------------------------------------
Many commenters agreed that the rule will increase retention and
diminish hiring costs. One commenter wrote: ``An employer is much more
likely to lose their employee when a mother is forced to choose between
a job and [her] child, or to have an employee who is struggling to
balance the needs of work and childcare.'' The Main Street Alliance
wrote: ``The costs of turnover can be high, and many business owners do
not fully realize how providing paid sick time can reduce this cost.
Employers who begin providing paid sick time often report that employee
turnover is reduced, saving them the cost of hiring and training
replacements, as well as that of lost productivity while the positions
are unfilled.'' Many commenters submitting a form letter noted that in
Jersey City, ``businesses that changed their policies to comply with
the law reported significant benefits, including . . . a reduction in
employee turnover.'' \129\ Many of these same commenters also cited
research, noted above, that ``shows that an employee is at least 25
percent less likely to voluntarily leave a job when the employee has
access to paid sick days.'' \130\ A study of Connecticut's paid sick
leave law, cited by many commenters, found 3.3 percent of employers
reported reduced employee turnover.\131\ However, 10.6 percent reported
increased loyalty which may result in additional long-term reductions
in turnover.
---------------------------------------------------------------------------
\129\ Lindemann, D. and Britton, D. (2015). Earned Sick Days in
Jersey City: A Study of Employers and Employees at Year One. Center
for Women and Work at Rutgers, the State University of New Jersey
Publication. Available at: http://cww.rutgers.edu/sites/cww.rutgers.edu/files/documents/working_families/Jersey_City_ESD_Issue_Brief.pdf.
\130\ Hill, H.D. (2013). Paid Sick Leave and Job Stability. Work
and Occupations, 40(2), 143-173.
\131\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------
Some commenters noted the high cost of turnover. The Main Street
Alliance wrote: ``In middle- and low-wage jobs, turnover costs are
estimated to be 16 to 20 percent of workers' annual wages.'' \132\
Commenters submitting a form letter noted, as we did above, that
``[a]cross all occupations, median turnover costs are estimated to be
21 percent of workers' annual wages.'' \133\ Additionally, one of the
two authors of this study wrote in support of this rulemaking and
confirmed the high cost of turnover.
---------------------------------------------------------------------------
\132\ Ibid.
\133\ Boushey, H. and Glynn, S.J. (2012). There Are Significant
Business Costs to Replacing Employees. Center for American Progress
Publication. Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
---------------------------------------------------------------------------
Firm Profits/Earnings
To the extent that productivity increases and turnover and hiring
costs are reduced, offering paid sick leave will increase profits
relative to what would be expected if the rule's costs and transfers
were considered in isolation. Some studies have suggested there may be
a positive relationship between paid sick leave and profits. In one
such study from 2001, researchers discovered that having a paid sick
leave policy had a positive effect on firms'
[[Page 67697]]
profits.\134\ The authors note, however, that efficiency wage theory
underpins their empirical result and thus requires compensation to
increase, which is not guaranteed to result from this rule because
employers may respond to the paid sick leave requirement, where
permitted by law, by reducing other fringe benefits, such as paid
vacation, or by decreasing base wages. Additionally, even if
compensation increases, efficiency wage theory may not apply if the
main reason for the improved productivity is a response to the goodwill
created by a voluntary increase in compensation offered by an
employer.\135\ Therefore, it may not be valid to assume that Meyer et
al.'s results would be comparable.\136\
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\134\ Meyer, C.S., Mukerjee, S., and Sestero, A. (2001). Work-
family Benefits: Which Ones Maximize Profits? Journal of Managerial
Issues, 13(1), 28-44.
\135\ Although efficiency wage literature tends to focus on
firms voluntarily paying higher wages and thus distinguishing
themselves from other firms, the literature provides no evidence
that voluntarily paying higher wages is a necessary condition for
efficiency wages. Efficiency wage theory may hold because employers
paying higher wages attract more productive workers.
\136\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
---------------------------------------------------------------------------
Few commenters discussed increased profits or earnings. The Legal
Aid Society reported: ``A study published three years after [San
Francisco's] ordinance's implementation found that over 70 percent of
employers did not report any impact on profitability.'' \137\
Conversely, the HR Policy Association noted that ``the studies [cited
in the NPRM] on productivity and firm profits are based on general
efficiency wage theory and presented without a quantitative cost-
benefit analysis of the specific leave mandate for current and future
beneficiaries of Executive Order 13706.'' The Department did not
quantify the value of these benefits since none of the studies provided
estimates that were directly applicable to employees covered by this
Final Rule.
---------------------------------------------------------------------------
\137\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick
Leave Ordinance: Outcomes for Employees and Employers. Institute for
Women's Policy Research.
---------------------------------------------------------------------------
Government Expenditures
As noted in the section on costs (V.C.ii.), contractors may pass
along part or all of the potentially increased costs to the government
in the form of higher contract prices. However, to the extent that
benefits from increased productivity and reduced turnover offset these
higher costs which the Department expects, this will reduce government
contract spending relative to what would be expected if the rule's
costs and transfers were considered in isolation.
Some commenters believe the rule may reduce government contracting
costs. Others noted that we did not adequately justify the assertion
that the rulemaking will provide cost savings. The National Association
of Manufacturers wrote the following: ``Simply stated, there is no
concrete evidence that requiring federal contractors to increase the
benefits they provide to their workers will result in cost savings or
efficiency.'' As previously noted, the Department discussed benefits
qualitatively because quantitative research findings related to
benefits were not directly applicable to the population of employees
and contracting firms impacted by this Final Rule.
Regardless of the direct impact on contract costs, there are other
important channels through which the Final Rule might affect government
expenditures. The transfer of income resulting from this Final Rule may
result in reduced social assistance payments, and thus decrease
government expenditures. For example, providing access to paid sick
leave may help workers retain their jobs, reducing eligibility for
government social assistance programs and lowering government
expenditures. Studies have shown that the more paid family leave an
employee receives, the less likely he/she is to utilize various social
assistance programs. For instance, a 2012 study by Rutgers University's
Center for Women and Work showed that women who received paid maternity
leave reported receiving $413 less in public assistance in the year
after their child was born than women who took no leave after
childbirth.\138\ The National Partnership for Women & Families also
cited research showing that ``allowing all workers to earn paid sick
time would result in . . . more than $500 million in savings to
publicly funded health insurance programs such as Medicare, Medicaid
and the State Children's Health Insurance Program.'' \139\
---------------------------------------------------------------------------
\138\ Houser, L. and Vartanian, T. (2012). Pay Matters: The
Positive Economic Impacts of Paid Family Leave for Families,
Businesses, and the Public. Rutgers University, Center for Women and
Work.
\139\ Miller, K., Williams, C., and Youngmin Yi. (2011). Paid
Sick Days and Health: Cost Savings from Reduced Emergency Department
Visits. Institute for Women's Policy Research.
---------------------------------------------------------------------------
Decreased Healthcare Expenditures
One positive impact of mandating paid sick leave benefits would be
that employees could mitigate future health costs by more frequently
investing in preventive care. For example, employees would likely use
paid sick leave to visit a physician, who could diagnose illnesses and
other ailments before they become more serious and costlier to
patients. A study analyzing data from the 2008 NHIS shows that
employees with paid sick leave were 12 percent more likely to have
visited a doctor in the past year.\140\ Additionally, employees with
paid sick leave were more likely to have received preventive procedures
such as an endoscopy (9.6 percent) or mammogram (7.8 percent).\141\
Researchers at the Institute for Women's Policy Research used data from
the NHIS on emergency room visits by workers with and without paid sick
leave to project that requiring employers to provide paid sick leave
would prevent roughly 1.3 million hospital emergency department visits
nationally each year, resulting in $1.1 billion in medical savings
annually (this includes the $500 million in savings to publicly funded
health insurance programs mentioned previously).\142\
---------------------------------------------------------------------------
\140\ Peipins, L., Soman, A., Berkowitz, Z., and White, M.C.
(2012). The Lack of Paid Sick Leave as a Barrier to Cancer Screening
and Medical Care Seeking. BMC Public Health, 12(250), 1-9.
\141\ Ibid.
\142\ Miller, K., Williams, C., and Youngmin Yi. (2011). Paid
Sick Days and Health: Cost Savings from Reduced Emergency Department
Visits. Institute for Women's Policy Research.
---------------------------------------------------------------------------
Commenters agreed that the rule could reduce health care costs
through preventative care and reduced use of emergency rooms. Several
commenters wrote: ``A day or more to recover can prevent routine
illnesses from turning into something much more serious. Those who earn
paid time for a doctor's visit are more likely to get annual check-ups
and critical screenings like mammograms, to identify any health
problems and seek timely treatment. They're less likely to be injured
on the job, and less likely to use an emergency room because the
doctor's office is closed after hours or an untreated condition
worsened.'' According to the National Partnership for Women & Families,
individuals without paid sick time are ``almost three times as likely
to report taking their child or a family member to a hospital emergency
room because they were unable to take time off work during their
regular work hours.\143\ The National Women's Law Center cited research
finding ``one-third of workers with annual family incomes below $35,000
who lacked paid sick days delayed seeking medical care, or
[[Page 67698]]
did not seek care, for an ill family member.'' \144\
---------------------------------------------------------------------------
\143\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitudes
and Experiences. National Opinion Research Center at the University
of Chicago Publication. Available at: http://news.uchicago.edu/static/newsengine/pdf/100621.paid.sick.leave.pdf.
\144\ Human Impact Partners. (2009). A Health Impact Assessment
of the Healthy Families Act of 2009. Available at: http://www.humanimpact.org/downloads/national-paid-sick-days-hia-report/.
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Job Growth and Labor Force Retention
One critique of the proposal to mandate paid sick leave has been
that the transfer of income from employers to employees might reduce
employment. However, various studies have argued the opposite, claiming
that paid sick leave are associated with greater job growth. Recently,
it has been shown that counties in which a city has implemented paid
sick leave have experienced greater job growth than neighboring
counties with no cities with paid leave laws. San Francisco County, for
example, saw a 3.5 percent increase in employment between the years of
2006 (when a paid sick leave law was implemented) and 2010, while the
five counties surrounding it experienced an employment decrease of 3.4
percent on average (the analysis did not control for other
characteristics that may affect employment or assess statistical
significance).\145\ Additionally, King County, the county in which
Seattle (which instituted a similar paid sick leave policy to San
Francisco in 2011) is located, found that the rate of annual job growth
in the food and retail industries increased much faster than within the
state of Washington as a whole between 2011 and 2013.\146\ We note,
however, that these results might also be associated with other
economic factors, such as labor migration as a result of the Great
Recession, and historically greater employment trends in the urban
areas of San Francisco and Seattle in comparison to neighboring
regions.
---------------------------------------------------------------------------
\145\ Petro, J. (2010). Paid Sick Leave Does Not Harm Business
Growth or Job Growth. Drum Major Institute for Public Policy.
\146\ The Main Street Alliance of Washington. (2013). Paid Sick
Days and the Seattle Economy: Job Growth and Business Formation at
the 1-year Anniversary of Seattle's Paid Sick and Safe Leave Law.
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Job growth was not mentioned by many commenters. However, Legal Aid
Society cited a study that found ``the sectors most affected by the
ordinance, including the food service and accommodation [industries],
experienced higher rates of job and business growth than neighboring
counties following the [San Francisco] ordinance's passage.'' \147\
---------------------------------------------------------------------------
\147\ Miller, K. and Towne, S. (2011). San Francisco Employment
Growth Remains Stronger With Paid Sick Days Law Than Surrounding
Counties. Institute for Women's Policy Research.
---------------------------------------------------------------------------
A related topic discussed by some commenters is that paid sick
leave can prevent workers from leaving the labor force. The New
Hampshire Campaign for a Family Friendly Economy noted, ``[w]hen
families are able to provide for their basic needs and know that their
loved ones are well cared for they are more likely to stay in the
workforce.'' Sarah Damaske, a researcher from Pennsylvania State
University, wrote: ``Access to paid sick leave is an important feature
of the types of jobs that college educated women find and that helps
workers maintain their employment.'' She explained how research she and
Adrianne Frech conducted suggests that maintaining full-time employment
has long-term physical and mental health benefits.
2. Benefits Mentioned by Commenters Not Previously Addressed in This
Section
Expanded Covered Reasons for Use
Commenters discussed the benefits associated with expanding
applicable uses of leave. In this rulemaking, the Department estimates
transfers by comparing current days of paid sick leave and newly
mandated days of sick leave. Benefits are then associated with
additional sick days provided and expected to be taken. The Department
notes that workers who currently have access to paid sick leave may
take more sick days to the extent the permitted uses under the
Executive Order and this Final Rule are broader than under their
existing paid sick leave or paid time off program. This impact is not
quantified in benefits or transfers due to a lack of applicable
quantitative evidence. The Williams Institute at the UCLA School of Law
wrote ``[t]he Propose[d] Rule could protect many more LGBT employees
who may not currently be able to use their paid sick leave to care for
their families.'' They also wrote that the rule ``would also allow
employees to care for the children of a same-sex spouse or partner,
even when the employee has not been able to form a legal relationship
with the child, for example, because of obstacles to adoption, parental
status, or custody.'' Legal Aid Society wrote that the rule ``will
increase job security for workers and families who have fewer workplace
protections, such as LGBT workers, and for workers who need paid sick
time to ensure their safety, such as survivors of domestic violence.''
Allowing paid sick leave to be used by victims of domestic
violence, sexual assault, and stalking also provides benefits.
According to surveys from the Bureau of Justice Statistics, reported by
the National Partnership for Women & Families, ``36 percent of rape and
sexual assault victims lost more than 10 days of work following
victimization, and more than half of stalking victims lost five or more
days of work.'' \148\
---------------------------------------------------------------------------
\148\ Bureau of Justice Statistics, U.S. Department of Justice.
(2013). Stalking. Available at: http://www.bjs.gov/index.cfm?ty=tp&tid=973; Bureau of Justice Statistics, U.S.
Department of Justice. (2002). National Crime Victimization Survey:
Personal and Property Crimes, 2000.
---------------------------------------------------------------------------
Disadvantaged Groups
As discussed above, the rulemaking may be especially helpful to the
LGBT community by allowing paid sick leave to be used to care for
certain individuals not related by blood or marriage. Additionally,
some minority groups, women, and low-wage earners, who have lower
prevalence of paid sick leave, will be helped by this rule. The Center
for the Study of Social Policy wrote: ``[P]aid sick time can be an
effective tool for advancing equity by providing crucial economic
stability to families and reducing familial stress during illnesses and
times of hardship,'' and observed that ensuring the ability to accrue
and use paid sick leave is particularly important for part-time, low-
income and single head of household workers who are disproportionately
women and people of color. The National Hispanic Council on Aging
wrote: ``According to a report released by the Congressional Joint
Economic Committee in March, 2010, about 49% of Hispanics working for
firms hiring over 15 employees did not have paid sick leave, while
about 60% of White workers overall reported receiving paid sick
leave.'' \149\ According to the AFL-CIO: ``Those with lower incomes are
especially vulnerable to the lack of paid sick days. Sixty-two percent
of low-wage private sector workers do not have employer-paid sick
leave.'' \150\
---------------------------------------------------------------------------
\149\ Congressional Joint Economic Committee. (2010). Expanding
Access to Paid Sick Leave: The Impact of the Healthy Families Act on
America's Workers. Available at: http://www.jec.senate.gov/public/_cache/files/abf8aca7-6b94-4152-b720-2d8d04b81ed6/sickleavereportfinal.pdf.
\150\ Institute for Women's Policy Research. (2015). Workers'
Access to Paid Sick Days in the States; DeRigne, L., Stoddard-Dare,
P., and Quinn, L. (2016). Workers Without Paid Sick Leave Less
Likely To Take Time Off For Illness Or Injury Compared To Those With
Paid Sick Leave. Health Affairs, 35(3), 520-527. (The AFL-CIO
compared the nearly 65 percent of families with incomes below
$35,000 who had no paid sick leave to the 25 percent of families who
earned more than $100,000 a year).
---------------------------------------------------------------------------
The National Organization for Women noted that ``[t]he burden of
inadequate paid sick leave and paid sick family leave falls heaviest on
mothers. Given current norms of caregiving, women are more likely to
need to stay home with a sick family member than fathers, yet mothers
are less likely than fathers to
[[Page 67699]]
have any paid time off, and those who do have some paid leave have
fewer weeks of paid time off than dads.'' \151\ They also noted that
``[s]ingle parent families, mostly headed by women, are
disproportionately affected by the inability to access paid sick
leave.''
---------------------------------------------------------------------------
\151\ Phillips, K.R. (2004). Getting Time Off: Access to Leave
among Working Parents. The Urban Institute. Available at: http://www.urban.org/sites/default/files/alfresco/publication-pdfs/310977-Getting-Time-Off.PDF.
---------------------------------------------------------------------------
Fair Competition
One business owner wrote: ``this rule will help level the playing
field so that businesses, like mine, that provide earned paid leave,
are more cost competitive. Right now we compete against other companies
that do not provide these benefits to their employees, therefore these
competitors have lower overhead and lower hourly rates.'' The public
policy organization Demos cited their report that quantified ``how the
federal contracting system fuels inequality by funding low-wage jobs
that lack critical benefits such as leave.'' \152\ The U.S. Women's
Chamber of Commerce wrote: ``Requiring more businesses to provide paid
sick leave will help level the playing field for those business owners
who are doing the right thing for their workers.'' Bredhoff & Kaiser
cited a 2015 study by the Department that found lack of paid sick leave
results in competitive disadvantages against those employers who do
provide such paid leave.\153\
---------------------------------------------------------------------------
\152\ Hiltonsmith, R. and Daly, L. (2014). Underwriting Good
Jobs: How to Place over 20 Million Americans on a Pathway to the
Middle Class Using Federal Purchasing Power. Available at: http://www.demos.org/publication/underwriting-good-jobs-how-place-over-20-million-americans-pathway-middle-class-using-fe.
\153\ U.S. Department of Labor. (2015). The Cost of Doing
Nothing--The Price We All Pay Without Paid Leave Policies to Support
America's 21st Century Working Families.
---------------------------------------------------------------------------
Morale, Stress, Financial Stability, and Job Retention
Commenters noted that the rule could help morale. Many commenters
cited a study of Connecticut's paid sick leave law that found
``employers identified several positive effects of paid sick days,
including improved employee productivity and morale.'' \154\ This study
found 29.6 percent of employers reported an increase in morale and 12.5
reported an increase in motivation. According to the Americans United
for Change: ``In jurisdictions where paid sick leave has been
implemented, research has shown that businesses reported positive
benefits such as improved morale.'' \155\
---------------------------------------------------------------------------
\154\ Appelbaum, E., et al. (2014). Good for Business?
Connecticut's Paid Sick Leave Law. Center for Economic and Policy
Research and The Murphy Institute at the City University of New York
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
\155\ Ibid.
---------------------------------------------------------------------------
Commenters believe the rule will reduce stress and improve
financial and job stability. NLWC noted that ``a lack of paid time off
can be a major stressor in parents' lives, which can impair their
interactions with their children and affect their development.'' \156\
Bredhoff & Kaiser wrote: ``As one 2011 report observed, missing just
three and a half days of work due to illness can cause a worker to
forfeit wages equivalent to the average monthly grocery bill for an
American family.'' \157\ NWLC cited research finding ``almost one in
five low-wage working mothers reported losing a job due to her own
illness or caring for a family member.'' \158\ Job stability benefits
may accrue to both workers with and without current paid sick leave.
According to the AFL-CIO, ``49 percent of private sector workers who
have paid sick leave report that their employers have dismissal
policies for missed time that, in practice, penalize their use of paid
sick time, and 34 percent fear penalties for using paid sick leave.''
\159\ This Final Rule may reduce employees' fear of retribution because
the rule proscribes interference and discrimination.
---------------------------------------------------------------------------
\156\ Vogtman, J. and Schulman, K. (2016). Set Up To Fail: When
Low-Wage Work Jeopardizes Parents' And Children's Success. National
Women's Law Center. Available at: http://nwlc.org/wp-content/uploads/2016/01/FINAL-Set-Up-To-Fail-When-Low-Wage-Work-Jeopardizes-Parents%E2%80%99-and-Children%E2%80%99s-Success.pdf.
\157\ Green, A., Filion, K., and Gould, E. (2011). The Need for
Paid Sick Days. Economic Policy Institute. Available at: http://www.epi.org/publication/the_need_for_paid_sick_days/.
\158\ Vogtman, J. and Schulman, K. (2016). Set Up To Fail: When
Low-Wage Work Jeopardizes Parents' And Children's Success. National
Women's Law Center. Available at: http://nwlc.org/wp-content/uploads/2016/01/FINAL-Set-Up-To-Fail-When-Low-Wage-Work-Jeopardizes-Parents%E2%80%99-and-Children%E2%80%99s-Success.pdf.
\159\ Miller, K., Drago, R., and Williams, C. (2011). Paid Sick
Days and Employer Penalties for Absence. Institute for Women's
Policy Research.
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vi. Regulatory Alternatives
The Department notes that Executive Order 13706 delegates to the
Secretary the authority only to issue regulations to ``implement the
requirements of this order.'' Because the Executive Order itself
establishes the basic paid sick leave requirements that the Department
is responsible for implementing, many potential regulatory alternatives
are beyond the scope of the Department's authority in issuing this
Final Rule. However, the Chamber/IFA expressed concern that the
Department did not present alternatives and wrote ``it is a well-
established principle of regulatory impact analysis under Executive
Order 12866 to present comparative costs and benefits for various
alternatives, including those the underlying law or Executive Order may
seem to exclude.'' In response, the Department has discussed some
alternatives posed by commenters in this section.
1. Alternative With Unlimited Accrual
As was done in the NPRM, for illustrative purposes only, this
section presents an alternative to the provisions set forth in this
Final Rule. The Department notes, however, that it considers this
alternative to be beyond the scope of the Department's authority under
the Executive Order. This alternative considers how transfer payments
would be affected if employees could accrue an unlimited number of
hours of paid sick leave, as long as they kept a maximum balance of 56
hours. For example, if paid sick leave is used periodically throughout
the year, an employee who works 80 hours per week could accrue and use
138.7 hours of paid sick leave (80 hours x 52 weeks x accrual rate of
one hour per 30 hours worked (1/30)). To calculate transfers associated
with this alternative, the modeling allows employees to accrue more
than 7 days of paid sick leave annually. The number of days of leave
accrued is based on the mean number of hours worked among full-time
employees in an industry. For example, in administrative and waste
services full-time employees work on average 41.7 hours per week. With
no cap on paid leave accrual, this would result in 9.0 days of leave
accrued annually for employees in this industry. Using this alternative
across all industries, the Department estimated 1.2 million additional
days of paid sick leave would be accrued by full-time employees in Year
1. If only a fraction of these additional sick days are actually taken
(as assumed earlier in the analysis and shown in Table 12) then 488,200
days will be taken by full-time employees and total transfer payments
would be $132.0 million. This is 54 percent higher than the current
transfer estimate of $85.5 million. However, this might be an
overestimate because employees are not required to accrue paid sick
leave while on vacation or leave.
2. Alternatives Suggested by Commenters
Some commenters made suggestions that could help reduce costs while
maintaining the intent of the rulemaking and continuing to provide the
intended benefits. Some of these have been incorporated in the Final
Rule. The
[[Page 67700]]
impact of these alternatives on costs was generally not quantifiable.
The American Benefits Council believes the requirement that
employers allow paid leave in increments of only 1 hour could cost tens
of thousands of dollars in adjustment costs which is ``an excessive
burden on such employers, and serves only to preserve an extra 3 hours
of paid leave for the employee.'' The Department believes that changing
a firm's tracking system to allow paid sick leave to be taken in
increments of one hour is not excessively burdensome, and the American
Benefits Council provided no basis for its estimate. The Department
also did not have the necessary data to estimate the impact on
regulatory costs of allowing a larger minimum hour requirement.
Commenters believe the requirement to allow accrual of paid sick
leave while on leave (e.g., sick leave, vacation) will be costly to
firms. The Equal Employment Advisory Council (EEAC) believes because
this definition of ``hours worked'' differs from the FLSA and FMLA this
requirement will ``be extremely confusing for federal contractors'' and
``changing the established rules and procedures for one particular set
of regulations will be significantly more difficult, requiring an
additional set of records that must be kept.'' They also noted that
``counting hours not actually `worked' as `hours worked' artificially
inflates the employee's entitlement under the Executive Order, which
likely used that term of art in accord with its traditional meaning.''
The Department adjusted this requirement such that paid sick leave is
only required to be earned on time suffered or permitted to work and
not paid time off. The transfer estimates presented in this analysis
continue to include accrual while on leave because of the difficulty in
adjusting them due to lack of reliable data; furthermore, these
adjustments are likely to be small since hours on vacation and paid
sick leave are a fraction of work hours and the paid sick leave time
that might be accrued in those periods will only be one-thirtieth of
the hours spent on vacation and sick leave (see V.C.iii.2.).
The Department notes that this change may reduce employer costs by
creating consistency across regulations. However, the Department
believes this change will have a small impact on the amount of leave
full-time employees accrue because annual accrual is limited to 56
hours. A worker who works 40 hours per week will reach this cap after
42 weeks of work. Therefore, even if they are on vacation/leave for the
other 10 weeks and technically accruing leave, this will not increase
their accrued hours. For part-time workers accruing while on vacation
or leave, this change will impact total hours accrued. The Department
made some calculations to demonstrate how transfers may change for the
19 percent of affected workers who work part-time now that accrual is
not required while on leave. We quantified the additional hours accrued
due to accruing while on paid sick leave and found it to be small. For
example, a worker who works 25 hours per week will accrue 43.3 hours of
paid sick leave annually (assuming no leave). If this worker takes a
week of sick leave, and paid sick leave is not accrued during this
week, then he will accrue 0.8 hours less of paid sick leave (25/30). If
this worker also took two weeks of vacation, he would accrue 1.7 fewer
hours of paid sick leave ((25 x 2)/30).
vii. Average Annualized Impacts by Industry
Commenters expressed concern that the Department did not adequately
consider costs for specific industries. For example, the MCAA wrote
that OMB Circular A-4 requires a more specific examination of the
impact of the rule on Federal construction projects. A recreation
permit holder on public lands wrote that the Department ``should
demonstrate how the costs associated with the rule make sense given the
. . . volume and gross revenues of small permit holders.'' In response,
the Department has added this section analyzing average annualized
costs and transfers by industry relative to payroll and revenue.
Table 17 shows 10-year average annualized costs and transfers by
industry using both a 3 percent and a 7 percent interest rate. These
annualized costs are then compared to estimated Federal contractors'
payroll and revenue. Across all industries, these average annualized
costs are less than 0.07 percent of payroll and less than 0.01 percent
of revenue. The industry where costs and transfers are the largest
share of both payroll and revenue is the professional, scientific, and
technical services industry. This industry is followed by the
construction industry (when looking at payroll) and the administrative
and waste services industry (when considering revenue).
Table 17--Average Annualized Costs and Transfers
[1,000s of 2015$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average annualized costs and Relative to payroll \a\ Relative to revenue \a\
transfers (1,000s) ---------------------------------------------------------------
Industry NAICS --------------------------------
3% Discount 7% Discount 3% Discount 7% Discount 3% Discount 7% Discount
rate rate rate rate rate rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and 11 $349 $384 0.015 0.016 0.003 0.003
hunting................................
Mining.................................. 21 61 68 0.001 0.001 0.000 0.000
Utilities............................... 22 715 721 0.001 0.001 0.000 0.000
Construction............................ 23 44,397 42,986 0.168 0.163 0.034 0.033
Manufacturing........................... 31-33 12,189 12,143 0.008 0.007 0.001 0.001
Wholesale trade......................... 42 966 1,090 0.003 0.003 0.000 0.000
Retail trade............................ 44-45 17,126 16,605 0.167 0.162 0.015 0.014
Transportation and warehousing.......... 48-49 27,132 26,257 0.139 0.134 0.034 0.032
Information............................. 51 3,900 3,866 0.006 0.006 0.001 0.001
Finance and insurance................... 52 4,298 4,150 0.071 0.069 0.010 0.010
Real estate and rental and leasing...... 53 795 882 0.012 0.013 0.002 0.002
Professional, scientific, and technical. 54 162,894 157,110 0.208 0.201 0.081 0.078
[[Page 67701]]
Management of companies and enterprises. 55 7 9 0.000 0.000 0.000 0.000
Administrative and waste services....... 56 53,427 51,586 0.149 0.144 0.073 0.071
Educational services.................... 61 4,903 4,792 0.025 0.025 0.008 0.008
Health care and social assistance....... 62 39,867 38,397 0.115 0.111 0.045 0.044
Arts, entertainment, and recreation..... 71 4,234 4,226 0.027 0.027 0.009 0.009
Accommodation and food services......... 72 8,712 8,464 0.146 0.142 0.042 0.041
Other services.......................... 81 3,167 3,149 0.078 0.078 0.020 0.020
---------------------------------------------------------------------------------------------------------------
Total private....................... .............. 389,139 376,884 0.065 0.063 0.010 0.009
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: Total payroll and revenue from 2012 SUSB; inflated to 2015$ using the CPI-U. Payroll and revenue for contractors estimated by taking ratio
of potentially affected contractors relative to all firms, within an industry, and multiplying by total payroll or revenue. If contractors tend to be
larger or smaller than other firms in the industry then revenue and payroll may be under or over estimated. These calculations assume no growth in
real value of revenue or payroll over these ten years.
Many commenters expressed concern that the rule would be especially
costly in the construction industry. However, as modeled, costs in the
construction industry are small compared with payroll and revenues
(less than 0.2 percent of payroll and less than 0.04 percent of
revenue). Moreover, the Department does not believe that one of the
primary concerns for the construction industry--the segregating of time
between Federal contracts and non-covered contracts (e.g., SBA
Advocacy, Sheet Metal and Air Conditioning National Association)--will
result in substantial costs because hours worked by laborers and
mechanics on DBA contracts must already be monitored. 29 CFR 5.5(a)(3).
Thus, in nearly all instances, if a construction contractor complies
with its existing DBA recordkeeping obligation, it will have
effectively segregated these employees' time. Therefore, there should
be minimal, or no, additional costs associated with tracking hours for
these employees. In addition, for employees working ``in connection
with'' covered contracts the Department has reduced the costs
associated with monitoring hours by permitting contractors to make
estimates consistent with Sec. 13.5(a)(1)(i). For these reasons, we
believe the estimated costs to the construction industry are
appropriate.
Another concern expressed by members of the construction industry
is the higher costs associated with absenteeism in this industry. The
AGC noted that ``absenteeism is particularly problematic in the
construction industry, where cost and schedule concerns are critical
and highly dependent on labor productivity.'' They also cite research
demonstrating these costs: ``Nicholson et al. (2006) \160\ have used
economic models to estimate that when a carpenter in construction is
absent, the cost of the absence is 50% greater than his/her daily wage,
and when a laborer in construction is absent, the cost is 9% greater
than his/her daily wage.'' The Department notes that even if costs and
transfers are 50 percent larger than estimated, they would still be
less than 0.3 percent of payroll and less than 0.06 percent of revenues
in the construction industry.
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\160\ Nicholson, S., Pauly, M.V., Polsky, D., Sharda, C., Szrek,
H., and Berger, M.L. (2006). Measuring the effects of work loss on
productivity with team production. Health Economics, 15(2), 111-123.
---------------------------------------------------------------------------
Appendix A
Table 18--Percent of Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered, Private Industry Workers, March 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
10 to 14 15 to 29
Industry <5 days 5 to 9 days days days >29 days Mean days Median days
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting................... ........... ........... ........... ........... ........... ........... ...........
Mining and logging........................................... ........... 42 15 ........... ........... 27 6
Utilities.................................................... ........... 34 38 ........... ........... 21 10
Construction................................................. 31 57 11 ........... ........... 6 5
Manufacturing................................................ 30 53 12 ........... ........... 8 5
Wholesale trade.............................................. 26 61 8 ........... ........... 8 5
Retail trade................................................. 21 70 7 ........... ........... 6 6
Transportation and warehousing............................... 16 44 34 ........... ........... 9 7
Information.................................................. 6 65 26 ........... ........... 9 7
Finance and insurance........................................ 7 49 39 ........... ........... 12 8
Real estate and rental and leasing........................... ........... 65 ........... ........... ........... 6 6
Professional, scientific, and................................ 11 59 22 ........... ........... 8 6
Management of companies and.................................. 14 66 ........... ........... ........... 12 6
Administrative and waste services............................ 36 40 22 ........... ........... 8 5
Educational services......................................... 8 35 52 ........... ........... 11 10
[[Page 67702]]
Health care and social assistance............................ 22 42 34 ........... ........... 8 7
Arts, entertainment, and recreation.......................... ........... 47 ........... ........... ........... 6 6
Accommodation and food services.............................. 37 58 ........... ........... ........... 6 5
Other services............................................... 22 47 21 ........... ........... 8 6
------------------------------------------------------------------------------------------
Total private............................................ 21 53 21 3 2 8 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Bureau of Labor Statistics, National Compensation Survey; Unpublished data
Note: Dashes indicate data not available or do not meet publication criteria.
Table 19--DOL Calculated Percent of Full-Time Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of days \a\
Industry -----------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting.................... 1 3 8 16 10 13 12 12 11 8
Mining and logging............................................ 0 0 0 0 9 41 3 9 29 0
Utilities..................................................... 0 0 0 0 0 1 4 12 29 3
Construction.................................................. 2 5 11 17 16 14 13 10 7 6
Manufacturing................................................. 1 4 11 23 10 10 12 12 11 5
Wholesale trade............................................... 1 4 11 22 13 12 14 14 13 3
Retail trade.................................................. 1 3 6 9 16 16 16 12 8 4
Transportation and warehousing................................ 0 2 6 13 6 10 13 11 12 11
Information................................................... 0 1 2 5 9 14 19 16 17 8
Finance and insurance......................................... 0 1 2 6 3 7 12 19 19 8
Real estate and rental and leasing............................ 1 4 7 11 13 14 14 11 8 3
Professional, scientific, and technical services.............. 0 2 5 10 14 19 13 14 13 8
Management of companies and enterprises....................... 0 2 7 20 7 14 12 19 26 0
Administrative and waste services............................. 1 4 12 25 7 8 9 9 9 8
Educational services.......................................... 0 0 2 5 2 4 6 9 11 11
Health care and social assistance............................. 1 2 7 14 7 9 11 10 9 13
Arts, entertainment, and recreation........................... 1 4 9 13 11 12 10 8 6 12
Accommodation and food services............................... 2 5 11 17 14 15 13 10 7 2
Other services................................................ 1 3 8 17 9 12 11 11 10 8
-----------------------------------------------------------------------------------------
Total private............................................. 1 3 8 16 10 13 12 12 11 8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Workers may receive more than 10 days of sick leave but since these data are not used in the analysis the Department does not present shares above
10 days.
Table 20--DOL Calculated Percent of Part-Time Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of days \a\
Industry -----------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting.................... 1 3 8 14 11 13 12 11 9 8
Mining and logging............................................ 0 0 0 0 10 40 3 10 27 0
Utilities..................................................... 0 0 0 0 1 2 5 13 27 3
Construction.................................................. 2 6 11 15 16 15 12 8 5 5
Manufacturing................................................. 1 5 12 21 11 11 12 11 9 4
Wholesale trade............................................... 1 4 11 20 14 13 14 12 10 3
Retail trade.................................................. 1 3 6 8 16 15 14 10 6 3
Transportation and warehousing................................ 1 2 6 12 7 10 12 10 9 11
Information................................................... 0 1 2 5 11 15 17 15 13 8
Finance and insurance......................................... 0 1 2 6 4 8 12 16 16 8
Real estate and rental and leasing............................ 2 4 7 10 14 13 13 9 5 3
Professional, scientific, and technical services.............. 1 2 5 9 15 18 13 12 10 8
Management of companies and enterprises....................... 0 2 7 18 8 15 13 18 21 0
Administrative and waste services............................. 1 5 13 23 8 9 9 8 7 8
Educational services.......................................... 0 1 2 5 3 5 7 8 9 11
Health care and social assistance............................. 1 3 7 13 7 9 9 9 7 12
Arts, entertainment, and recreation........................... 2 5 9 12 12 11 10 7 4 11
Accommodation and food services............................... 2 6 11 15 15 15 12 8 5 2
Other services................................................ 1 4 8 15 10 12 11 10 8 8
-----------------------------------------------------------------------------------------
Total private............................................. 1 3 8 14 11 13 12 11 9 8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Workers may receive more than 10 days of sick leave but since these data are not used in the analysis the Department does not present shares above
10 days.
[[Page 67703]]
V. Final Regulatory Flexibility Analysis (FRFA)
The Regulatory Flexibility Act of 1980 (RFA), as amended by the
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
hereafter jointly referred to as the RFA, requires agencies to prepare
regulatory flexibility analyses when they propose regulations that will
have a significant economic impact on a substantial number of small
entities. See 5 U.S.C. 603. This rule is expected to have a significant
economic impact, and thus the Department has prepared a FRFA.
The RFA defines a ``small entity'' as a (1) small not-for-profit
organization, (2) small governmental jurisdiction, or (3) small
business. SBA establishes separate standards for each 6-digit NAICS
industry code, and standard cutoffs are typically based on either the
average annual number of employees or average annual receipts. For
example, small businesses are generally defined as having fewer than
500, 1,000, or 1,250 employees in manufacturing industries and less
than $7.5 million in average annual receipts for many nonmanufacturing
industries.\161\ SBA revised its size standards February 26, 2016.\162\
In this analysis, the Department used the indicator in the SAM data to
identify small contractors based on the six-digit NAICS code listed as
their primary NAICS.\163\ However, because most firms would have
registered on SAM prior to SBA's update of its size standards, the
Department expected more firms would have been listed as small had they
registered after the update. To account for this, the Department used
SBA's estimates of the increase in the number of small business in each
industry,\164\ converted it to a percentage increase in the number of
small businesses in that industry, and applied it to the number of
entities listed as small in the SAM database. For example, SBA
estimated the revised standards would result in an additional 1,250
manufacturers classified as small, about 0.5 percent of small
manufacturing firms. We therefore increased the number of small
affected manufacturers by 0.5 percent. The subcontracting firms
identified were all assumed to be small. The Department applied the
national ratio of small businesses to total business by industry
(determined by applying the updated SBA standards to the 2012
Statistics of U.S. Businesses (SUSB) data) to estimate the number of
small entities operating under covered contracts on Federal property.
---------------------------------------------------------------------------
\161\ However, some exceptions do exist, the most notable being
that depository institutions (including credit unions, commercial
banks, and non-commercial banks) are classified by total assets.
Small governmental jurisdictions are another noteworthy exception.
They are defined as the governments of cities, counties, towns,
townships, villages, school districts, or special districts with
populations of less than 50,000 people. See http://www.sba.gov/advocacy/regulatory-flexibility-act.
\162\ See https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
\163\ The ``NAICS CODE STRING'' variable (column 33) and the
``PRIMARY NAICS'' variable (column 31) were the specific variables
used. If the primary NAICS value contained a ``Y'' at the end when
listed in the ``NAICS CODE STRING'' column, the firm was identified
as small.
\164\ See https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/whats-new-size-standards.
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A. Commenters' Response
The Department specifically asked for comments on the impacts of
the proposed rule on small businesses, particularly whether
alternatives exist that will reduce burdens on small entities and still
meet the rule's objectives. Most small businesses that commented
expressed concern the rulemaking will increase their costs in general.
Some noted the costs will be more burdensome for small businesses. The
National Federation of Independent Business wrote:
At the majority of these [small] businesses, the task of
compliance will fall on the small business owner. This individual is
unlikely to be an expert in the complex details of paid sick leave
program management. Accordingly, it will take additional time to
comprehend the requirement and may also require the covered small
business to hire a consultant or other expert to assist with
implementation.
Women Impacting Public Policy wrote that ``[l]arger contractors
with higher revenues and large administrative staffs are more capable
of handling this compliance burden and are more likely to already have
the necessary systems in place. Women-owned businesses, which are by-
and-large small businesses, will encounter costs and burdens that are
not experienced by other firms.''
Other small businesses supported the rulemaking. For example, the
U.S. Women's Chamber of Commerce wrote: ``These women business owners
nationwide already provide paid sick leave to their employees because
many of them have been previously in workforces that did not offer
these critical benefits . . . Requiring more businesses to provide paid
sick leave will help level the playing field for those business owners
who are doing the right thing for their workers.''
Commenters questioned the Department's estimated implementation and
regulatory familiarization cost estimates. Other commenters argued that
the administrative costs are more burdensome for small businesses. The
National Electrical Contractors Association wrote that ``smaller
companies usually only have a single person--at the most two
employees--that handle time keeping and record keeping of items such as
this requirement.'' A small business owner commented that he offers
paid time off, and that ``[g]oing backwards to a mandatory `sick time'
including tracking with all of the required documentation would add
more complications.'' Other commenters stated that the definition of
family in the NPRM lowers the administrative costs compared to more
restrictive definitions. A small business owner stated that
administrative efficiency was improved and wrote: ``As a small business
owner, the administrative hassle of having to dig into employee's
personal life to determine their eligibility is not worth the effort.
Any specific limitations on the proposed definition of family would
only increase the administrative burden.'' As noted in Section V.C.ii.
the Department has increased the estimated time required for regulatory
familiarization and recurring administrative costs for this Final Rule.
Last, in terms of specific costs, commenters expressed skepticism
about the average payroll increase estimates for small businesses. SBA
Advocacy stated that ``a small recreation company with 20 full-time
staff and 220 seasonal workers estimated costs of $25,000 to comply
with this regulation. Multiple small restaurant franchisees located in
military bases reported costs from $5,000 to $35,000.'' However, these
estimates are difficult to evaluate because we do not know what
assumptions were made in developing them and furthermore what ``costs''
are included in these estimates.
Some commenters believe the Executive Order and implementing
regulations will hurt small businesses' ability to compete in bidding.
SBA Advocacy noted that ``[s]mall recreation companies have stated that
they will be reluctant to sign a new contract to provide services such
as food or equipment rentals on federal lands, as they may not be able
to increase the price of their products to offset these costs.'' The
National Federation of Independent Business wrote that ``[m]ost small
companies will have to increase the price of their bids to maintain the
same return on the contract. Higher prices will make their bids less
competitive than a larger federal contractor that may already have a
compliant paid sick leave program in place.''
[[Page 67704]]
Some commenters suggested alternatives that would reduce the burden
on small entities, including an exemption for small businesses. Several
commenters, such as the General Contractors Association of Hawaii and
the Hawaiian Dredging Construction Company, stated that small
businesses should be exempt from the requirement of providing paid sick
leave, although they varied on the size of contracting firms that
should be excluded. Independent Electrical Contractors commented that
``the Department should take into account processes and procedures
already in place in most small businesses,'' and further recommended
that the Department should allow companies to ``apply a 90 day
probationary period to new employees before they are able to take paid
sick leave.'' SBA Advocacy stated that DOL should consider alternatives
suggested by commenters ``such as exemptions for certain part-time and
seasonal work.'' The Department has addressed requests for exclusions,
like those described above, in the subpart A preamble.
The Chief Counsel for Advocacy of the Small Business Administration
(SBA) was notified of this rule upon its submission to OMB under EO
12866. Advocacy noted several concerns; in addition to those described
in the preceding paragraphs, it stated that the Department
underestimated the number of small businesses affected by this Final
Rule by only including contracting companies registered in SAM. SBA
Advocacy wrote: ``Advocacy believes that there may be hundreds or
thousands of small businesses such as restaurants, retail, and outdoor
recreation companies operating on federal lands, in federal buildings
and on military bases that DOL has not adequately counted in
determining the numbers of small businesses affected or in estimating
the costs of this rule.'' SBA Advocacy provided additional information
about the number of concessions contracts, commercial use
authorizations, and permits issued by the National Park Service, the
U.S. Forest Service, GSA, and the Army and Air Force Exchange Service.
As described in section V.B.ii., the Department included estimates of
these potentially affected contractors in this Final Rule.
The Department describes responses to some of these comments in the
appropriate part of the FRFA. Responses to comments that also apply to
the overall analysis were generally included in the appropriate section
of the RIA.
B. Number of Small Entities and Employees to Which the Final Rule Will
Apply
The number of prime contracting entities was estimated based on the
GSA's System for Award Management (SAM) for August 2015 (415,300).\165\
This number is lower than in the proposed rulemaking because firms
enrolled on SAM strictly for grants have now been excluded (see
V.B.ii).\166\ The Department understands that many entities that are
prime contractors listed in SAM are also subcontractors, and therefore
SAM includes both. However, we were unable to determine the number of
subcontractors who are not in the SAM database. Therefore, the
Department examined five years of USASpending data \167\ and found
24,400 subcontractors who do not hold contracts as primes (and thus may
not be included in SAM), and added these subcontractors to the total
from SAM to obtain a total estimate of 439,700 firms that may be
holding procurement contracts. In response to comments from SBA
Advocacy and others, the Department has also included an estimated
49,800 entities operating under covered contracts on Federal property
or lands. Estimating the number of entities operating under covered
contracts on Federal property or lands involved many data sources and
assumptions as described in section V.B.ii. These calculations result
in 489,400 potentially affected contractors. Of these, an estimated
320,000 are considered small contracting firms.\168\
---------------------------------------------------------------------------
\165\ Data are released in monthly files.
\166\ Entities registering in SAM are asked if they wish to bid
on contracts. If a non-Federal entity answers ``Yes'' to this
question, SAM marks the registration as being ``All Awards.'' This
is the ``Purpose of Registration'' column in the SAM data. The
Department included only firms with a value of ``Z2,'' which denotes
``All Awards.'' See section ``3.2 Determining your Purpose of
Registration'' in the System for Award Management User Guide
available at: https://test.sam.gov/sam/SAM_Guide/SAM_User_Guide.htm#_Toc330768975.
\167\ The Department identified subawardees from the
USASpending.gov data between FY2011 and FY2015 who did not perform
work as a prime during those years.
\168\ SAM data for August 2015 provides information on which
contractors are small. All subcontractors (identified with
USASpending data for FY2011-FY2015) are considered small due to lack
of data. The proportion of entities operating under covered
contracts on Federal property or lands that are small were assumed
to be the same as the national proportions in 2012 SUSB data. These
proportions were calculated and applied by industry.
---------------------------------------------------------------------------
This estimated number of potentially affected small contractors
includes those that strictly provide materials and supplies to the
government and other firms with no Federal contracts covered by the
Executive Order. These firms may accrue regulatory familiarization
costs despite not having employees affected, although their cost will
be minimal.\169\ However, these firms should be eliminated when we
consider costs per establishment with affected employees. Information
was not available to eliminate these firms from the SAM database.\170\
---------------------------------------------------------------------------
\169\ In the proposed rule the Department said these firms may
not incur familiarization costs. Commenters contended that these
firms will still accrue regulatory familiarization costs because, as
the U.S. Chamber of Commerce wrote: ``[e]ven contractors exempt from
the proposed rule for some reason will, first, have to review the
regulation and their own book of contracts (and prospective bids) to
make such a determination.''
\170\ This may also be an overestimate since some firms in the
SAM database do not currently have contracts with the Federal
government.
---------------------------------------------------------------------------
Thus, the Department used data from USASpending to estimate a more
appropriate number of small contractors with affected employees. Using
the FY2015 USASpending database, the Department found 70,600 unique
private small prime contracting firms.\171\ Adding in the small
subcontractors and the small entities operating under covered contracts
on Federal property yields an estimated 143,400 small contractors with
active contracts in Year 1. Because this Final Rule only applies to new
contracts, the Department divided the number of contractors by 5 to
represent the number of contractors with new contracts in Year 1
(28,700 firms). Lastly, the Department adjusted this estimate to
exclude a share of potentially affected contractors who have
potentially affected employees but no affected employees because they
already provide the required number of days of paid sick leave.\172\
The ratio of affected employees to potentially affected employees in
small businesses
[[Page 67705]]
was calculated and multiplied by the number of small contractors with
potentially affected employees by industry to make this adjustment.
These calculations result in an estimated 21,400 small contractors with
affected employees in Year 1. The calculations of direct costs and
transfers per small contractor with affected employees shown in Table
23 include only these 21,400 small contractors.
---------------------------------------------------------------------------
\171\ In the USASpending data, small contractors were identified
based on the ``contractingofficerbusinesssizedetermination''
variable. The description of this variable in the USASpending.gov
Data Dictionary is: ``The Contracting Officer's determination of
whether the selected contractor meets the small business size
standard for award to a small business for the NAICS code that is
applicable to the contract.'' The Data Dictionary is available at:
https://www.usaspending.gov/DownloadCenter/Documents/USAspending.govDownloadsDataDictionary.pdf.
\172\ As discussed in the RIA, some potentially affected
employees considered not affected in the Department's analysis may
actually be affected due to a broader scope of uses allowed for
taking paid sick leave. However, data are not sufficient to estimate
the number of additional employees that will be affected due to
this, how many additional days of paid sick leave will be taken by
these employees, or the transfers associated with any additional
affected employees. Thus, for the purpose of calculating average
costs and transfers per contractor with affected employees, any
possible additional employees affected are excluded from both the
numerator and denominator for consistency.
---------------------------------------------------------------------------
The number of employees in small contracting firms is unknown. The
Department estimated the share of total Federal contracting
expenditures in the USASpending data associated with contractors
labeled as small, by industry. The Department then applied these shares
to all affected employees to estimate the share of affected employees
in small entities. However, based on 2015 NCS data, smaller firms are
less likely to offer sick leave pay, and therefore employees in small
contracting firms are more likely to be affected. The Department
adjusted for this using data from the 2015 NCS on the distribution of
employees with paid sick leave by employer size. For these purposes,
small businesses were approximated as those having less than 500
employees. The Department found that employees in firms with less than
500 employees were 1.1 times more likely to not have paid sick leave
than employees in all firms. Therefore, the Department multiplied the
previously estimated share of affected employees working for small
contractors (e.g., 22.3 percent in the information industry) by 1.1 to
better estimate the percent of affected employees in small businesses
in each industry (e.g., 24.9 percent in the information industry). The
Department then multiplied the percent affected that are in small
businesses by the total number of affected employees by industry, then
summed over all industries, to find that 66,800 employees employed by
small contractors in Year 1 would be affected by the rule.
Table 21--Small Federal Contracting Firms and Their Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contractors \a\ % of Affected employees in
-------------------------- % of affected year 1
expenditure employees -------------------------
Industry NAICS in small in small
Total Small \b\ contracting contracting Total Small
firms \c\ firms \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting................... 11 8,525 4,200 82.4 92.3 58 54
Mining....................................................... 21 1,668 1,384 56.4 63.1 39 24
Utilities.................................................... 22 5,641 4,569 11.9 13.3 294 39
Construction................................................. 23 61,399 52,251 55.2 61.8 20,280 12,526
Manufacturing................................................ 31-33 69,513 8,332 13.2 14.8 6,372 942
Wholesale trade.............................................. 42 28,626 24,009 51.5 57.6 133 77
Retail trade................................................. 44-45 17,682 11,421 29.4 32.9 16,709 5,497
Transportation and warehousing............................... 48-49 17,780 13,158 19.0 21.3 15,609 3,321
Information.................................................. 51 19,511 16,443 22.3 24.9 2,587 645
Finance and insurance........................................ 52 2,712 1,631 2.6 2.9 2,484 72
Real estate and rental and leasing........................... 53 20,705 15,326 28.1 31.4 95 30
Professional, scientific, and technical serv................. 54 101,538 69,335 26.1 29.2 72,713 21,254
Management of companies and enterprises...................... 55 264 157 9.3 10.4 0 0
Administrative and waste services............................ 56 33,374 27,598 25.4 28.4 50,648 14,377
Educational services......................................... 61 13,645 9,074 14.7 16.4 2,456 403
Health care and social assistance............................ 62 27,314 12,099 16.2 18.1 19,587 3,548
Arts, entertainment, and recreation.......................... 71 26,922 25,336 54.4 60.8 2,184 1,329
Accommodation and food services.............................. 72 14,524 12,376 22.2 24.8 7,718 1,915
Other services............................................... 81 18,077 11,262 30.7 34.4 2,092 719
------------------------------------------------------------------------------------------
Total private............................................ ........... 489,419 319,962 24.7 27.7 222,059 66,772
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: GSA's System for Award Management (SAM) for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all
industries. All firms are assumed to be potentially affected. Includes 24,352 additional subcontractors identified in USASpending.gov from FY2011-
FY2015 and includes 49,757 firms with operations on Federal land or property.
\b\ SAM for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all industries. All small firms are assumed to
be potentially affected. Assume all 24,352 additional subcontractors identified in USASpending.gov are small.
\c\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in FY2013-FY2015.
\d\ Employees in firms with less than 500 employees were 1.1 times more likely to have no paid sick leave than employees in all firms. The Department
adjusted upward the number of affected employees by 1.1.
C. Small Entity Costs of the Final Rule
Employers will need to keep additional records for affected
employees. This will result in an increase in employer burden, which
was estimated in the PRA portion (section V.I.). Note that the burdens
reported for the PRA section of this Final Rule include the entire
information collection and not merely the additional burden estimated
as a result of this Final Rule.
Small entities will also have regulatory familiarization,
implementation, administrative, and payroll costs (i.e., transfers).
These are discussed in section V.C. Total direct costs (i.e., excluding
transfers) to small contractors in Year 1 were estimated to be $78.9
million (Table 22). This is 63 percent of total direct costs in Year 1
(compared with 30 percent of affected employees in small contracting
firms). Calculation of these costs is discussed in the following
paragraphs.
Estimated regulatory familiarization costs and initial
implementation costs in Year 1 apply to all small firms that
potentially hold covered contracts (320,000). Regulatory
familiarization costs were assumed to take two hours of time in Year 1,
on average across these potentially affected contractors of all sizes.
In the NPRM, the Department estimated one hour of time was necessary
for this purpose, but due to comments the Department has increased this
time estimate to two hours in the Final Rule. An hour of a human
resource manager's time is valued at $82.17 per hour.173 174
Initial implementation costs, the upfront cost that is thought to be
comparable across contractors of all sizes, and thus is a fraction of
the total implementation costs, were estimated as taking either 1
[[Page 67706]]
or 10 hours of a human resource worker's time, (depending on whether
the contractor has a paid leave system in place), valued at $27.50 per
hour.\175\
---------------------------------------------------------------------------
\173\ This includes the mean base wage of $56.29 from the OES
plus benefits paid at a rate of 46 percent of the base wage, as
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
\174\ Time and wage estimates for small establishments are the
same as used in the analysis for all contractors. We have not
tailored these to small businesses due to lack of data.
\175\ This includes the mean base wage of $18.84 from the OES
plus benefits paid at a rate of 46 percent of the base wage, as
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------
In addition to upfront implementation costs, contractors with
affected employees will experience recurring implementation costs as
employees gradually become covered. As each employee is affected, the
contractor will need to spend some time updating the accounting systems
used to track paid sick leave. Therefore, implementation costs are
modeled as a function of newly affected employees for the first five
years.\176\ Because of this component, costs vary with contractor size.
The Department estimated one hour of time per newly affected employee
will be spent by a human resources worker on implementation costs.
Contractors may also incur recurring administrative costs associated
with maintaining records of paid sick leave and adjusting scheduling.
In the NPRM, the Department assumed a human resource worker will spend
an additional fifteen minutes per affected employee annually on ongoing
administrative costs. Due to comments the Department has increased this
time estimate to twenty minutes in the Final Rule.
---------------------------------------------------------------------------
\176\ The Final Rule will only apply to employees on new
contracts. The Department estimates it will take five years for all
employees to be affected. Therefore, adjustment costs will accrue
over the first five years.
---------------------------------------------------------------------------
To calculate payroll costs, the Department began with total
transfers estimated in section V.C.iii., and multiplied this by the
ratio of affected employees in small contracting firms to all affected
employees. This yields the share of transfers occurring in small
Federal contracting firms, $26.1 million in Year 1 (Table 22), which is
31 percent of total transfers for all contracting firms in Year 1. As
noted in V.C.iii., total transfers may be an overestimate if
contractors tend to perform work for multiple clients, rather than
working exclusively on Federal contracts. This may be especially
pertinent for small business since according to a report by American
Express Open, Federal contracting comprises 19 percent of revenues for
small contracting firms.\177\ Table 23 contains the average costs and
transfers per small contractor with affected employees by industry (see
VI.B. for explanation). Average Year 1 costs and transfers per small
contractor with affected employees range from $174 to $3,391.
---------------------------------------------------------------------------
\177\ American Express OPEN. (2013). Trends in Federal
Contracting for Small Businesses: A Research Summary for the
American Express OPEN for Government Contracts Program.
---------------------------------------------------------------------------
To estimate whether these costs and transfers will have a
substantial impact on small entities they are compared to total
revenues for these firms. Based on Statistics of U.S. Businesses (SUSB)
data, small Federal contractors had total annual revenues of $566.6
billion in 2015 from all sources (Table 24).\178\ Transfers from small
contractors and costs to small contractors in Year 1 ($105.0 million)
are less than 0.02 percent of revenues on average and are no more than
0.17 percent in any industry. Therefore, the Department believes this
Final Rule will not have a significant impact on small businesses.
---------------------------------------------------------------------------
\178\ Total revenue for small firms from 2012 SUSB; inflated to
2015$ using the CPI-U. Revenues for small contractors calculated by
multiplying total revenue by the ratio of number of small
contracting firms to total number of small firms.
---------------------------------------------------------------------------
To estimate average annualized costs to small contracting firms the
Department projected small business costs and transfers forward 9
years. To do this the Department calculated the ratio of affected
employees in small contracting firms to all affected employees in Year
1, then multiplied this ratio by the 10-year projections of national
costs and transfers (see section V.C.). This yields the share of
projected costs and transfers attributable to small businesses (Table
25).
Table 22--Costs and Transfers to Small Contractors in Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Direct employer costs ($1,000s)
------------------------------------------------------------------------------------- Transfers
Industry NAICS Regulatory Initial Recurring Recurring ($1,000s)
familiarization implementation implementation administrative Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and....... 11 $690 $313 $1 $0 $1,005 $26
Mining................................... 21 227 103 1 0 331 2
Utilities................................ 22 751 341 1 0 1,093 19
Construction............................. 23 8,587 3,894 344 115 12,940 5,908
Manufacturing............................ 31-33 1,369 621 26 9 2,025 378
Wholesale trade.......................... 42 3,945 1,789 2 1 5,738 25
Retail trade............................. 44-45 1,877 851 151 50 2,930 1,273
Transportation and warehousing........... 48-49 2,162 981 91 30 3,265 1,383
Information.............................. 51 2,702 1,225 18 6 3,951 198
Finance and insurance.................... 52 268 122 2 1 392 28
Real estate and rental and leasing....... 53 2,519 1,142 1 0 3,662 17
Professional, scientific, and............ 54 11,394 5,167 585 195 17,341 10,678
Management of companies and.............. 55 26 12 0 0 38 0
Administrative and waste services........ 56 4,535 2,057 395 132 7,119 3,310
Educational services..................... 61 1,491 676 11 4 2,182 171
Health care and social assistance........ 62 1,988 902 98 33 3,020 1,529
Arts, entertainment, and recreation...... 71 4,164 1,888 37 12 6,100 496
Accommodation and food services.......... 72 2,034 922 53 18 3,026 464
Other services........................... 81 1,851 839 20 7 2,716 211
--------------------------------------------------------------------------------------------------------------
Total private........................ ........... 52,580 23,846 1,836 612 78,874 26,116
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 23--Average Costs and Transfers per Small Contractor With Affected Employees in Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small
Total small contractors Small Total costs
contractors with contractors Direct Transfers and
Industry NAICS with potentially with affected employer costs per small transfers
potentially affected employees in per small contractor per small
affected employees in year 1 \c\ contractor contractor
employees \a\ year 1 \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting... 11 1,957 391 391 $161.73 $66.08 $227.81
[[Page 67707]]
Mining....................................... 21 184 37 28 189.18 72.85 262.03
Utilities.................................... 22 2,661 532 74 176.12 254.88 431.00
Construction................................. 23 17,899 3,580 3,368 293.08 1,754.34 2,047.42
Manufacturing................................ 31-33 10,941 2,188 1,784 176.05 211.87 387.91
Wholesale trade.............................. 42 1,484 297 230 168.89 109.97 278.85
Retail trade................................. 44-45 5,578 1,116 857 391.94 1,485.43 1,877.37
Transportation and warehousing............... 48-49 7,931 1,586 925 288.37 1,495.84 1,784.21
Information.................................. 51 8,293 1,659 701 190.45 282.19 472.64
Finance and insurance........................ 52 198 40 12 383.26 2,440.85 2,824.12
Real estate and rental and leasing........... 53 2,326 465 328 160.04 52.86 212.91
Professional, scientific, and technical 54 26,396 5,279 3,542 376.70 3,014.52 3,391.22
services....................................
Management of companies and enterprises...... 55 2 0 0 158.77 15.31 174.08
Administrative and waste services............ 56 13,533 2,707 2,390 377.26 1,384.81 1,762.07
Educational services......................... 61 3,140 628 230 220.97 742.28 963.25
Health care and social assistance............ 62 4,916 983 581 380.47 2,629.11 3,009.58
Arts, entertainment, and recreation.......... 71 23,191 4,638 3,665 169.99 135.36 305.34
Accommodation and food services.............. 72 7,715 1,543 1,503 203.41 308.64 512.06
Other services............................... 81 5,007 1,001 774 190.72 272.77 463.49
------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov FY2015. Firms with contracting revenue, excluding contracts only for goods. Also includes 24,352 additional subcontractors
identified in USASpending.gov from FY2011-FY2015 and 48,400 firms with operations on Federal land or property.
\b\ Estimated as 20 percent of contractors with revenue from service contracts in FY2015. If affected employees in Year 1 are spread over more than 20
percent of these contractors, average costs and transfers per small contractor in Year 1 would be lower.
\c\ Calculated by multiplying the number of small contractors with potentially affected employees in Year 1 by percentage of potentially affected
workers who are affected, by industry. This may be an underestimate of the number of small contractors with affected employees if contractors have
some potentially affected employees who are affected and others who are not affected.
Table 24--Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1
----------------------------------------------------------------------------------------------------------------
Total Small
transfers & contracting Total as share
Industry NAICS costs firm revenues of revenues
($1,000s) (billions) \a\ (%)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...... 11 $1,031 $4.2 0.025
Mining.......................................... 21 333 7.7 0.004
Utilities....................................... 22 1,112 80.6 0.001
Construction.................................... 23 18,848 58.1 0.032
Manufacturing................................... 31-33 2,403 40.7 0.006
Wholesale trade................................. 42 5,763 159.6 0.004
Retail trade.................................... 44-45 4,202 22.6 0.019
Transportation and warehousing.................. 48-49 4,648 17.6 0.026
Information..................................... 51 4,149 41.8 0.010
Finance and insurance........................... 52 421 1.8 0.024
Real estate and rental and leasing.............. 53 3,679 10.6 0.035
Professional, scientific, and technical services 54 28,019 53.5 0.052
Management of companies and enterprises......... 55 38 0.0 0.162
Administrative and waste services............... 56 10,429 20.9 0.050
Educational services............................ 61 2,353 8.2 0.029
Health care and social assistance............... 62 4,549 11.2 0.041
Arts, entertainment, and recreation............. 71 6,597 19.5 0.034
Accommodation and food services................. 72 3,490 2.2 0.161
Other services.................................. 81 2,928 5.9 0.050
---------------------------------------------------------------
Total private............................... .............. 104,990 566.6 0.019
----------------------------------------------------------------------------------------------------------------
\a\ Source: Total revenue for small firms from 2012 SUSB; inflated to 2015$ using the CPI-U. Adjusted with ratio
of small contracting firms to all small firms.
Table 25--Projected Costs to Small Businesses
[Millions of 2015$]
----------------------------------------------------------------------------------------------------------------
Direct
Year/discount rate employer costs Transfers Total
----------------------------------------------------------------------------------------------------------------
Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Year 1.......................................................... $78.9 $26.1 $105.0
Year 2.......................................................... 3.2 53.8 57.0
[[Page 67708]]
Year 3.......................................................... 3.8 81.9 85.8
Year 4.......................................................... 4.5 110.5 114.9
Year 5.......................................................... 5.1 139.5 144.6
Year 6.......................................................... 3.2 141.8 145.0
Year 7.......................................................... 3.2 144.2 147.5
Year 8.......................................................... 3.3 146.7 149.9
Year 9.......................................................... 3.3 149.2 152.5
Year 10......................................................... 3.3 151.7 155.0
----------------------------------------------------------------------------------------------------------------
Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate................................................ 12.2 111.2 123.4
7% discount rate................................................ 13.7 106.8 120.5
----------------------------------------------------------------------------------------------------------------
D. Differing Compliance and Reporting Requirements for Small Entities
This Final Rule provides no differing compliance and reporting
requirements for small entities.
E. Least Burdensome Option or Explanation Required
The Department believes it has chosen the most effective option
that implements the Executive Order, and limits burdens to the extent
reasonably possible given the requirements of the Executive Order.
Taking no regulatory action does not address the Department's concerns
discussed above (see Need for Regulation section) and would contravene
the Executive Order. The Department also found the option to allow
unlimited accrual (section V.C.vi.) to be overly burdensome on business
as well as beyond the scope of the Executive Order.
Pursuant to section 603(c) of the RFA, the following alternatives
are to be addressed:
i. Differing compliance or reporting requirements for small
entities. To establish differing compliance or reporting requirements
for small businesses would undermine the impact of the rule. The
Department makes available a variety of resources to employers for
understanding their obligations and achieving compliance. Therefore,
the Department is not implementing differing compliance or reporting
requirements for small businesses.
ii. The clarification, consolidation, or simplification of
compliance and reporting requirements for small entities. The
Department makes available a variety of resources to employers for
understanding their obligations and achieving compliance. As such, the
Department has not clarified, consolidated, or simplified the rule.
iii. The use of performance rather than design standards. The
Department makes available a variety of resources to employers for
understanding their obligations and achieving compliance. Therefore,
the Department is not relying upon performance to determine compliancy.
iv. An exemption from coverage of the rule, or any part thereof,
for such small entities. To exempt small businesses from the Final Rule
would undermine the impact of the rule. The Department makes available
a variety of resources to employers for understanding their obligations
and achieving compliance. Therefore, the Department is not implementing
a ``small business'' exemption.
F. Identification, to the Extent Practicable, of all Relevant Federal
Rules That May Duplicate, Overlap, or Conflict With the Final Rule
The Department is not aware of any Federal rules that duplicate,
overlap, or conflict with this Final Rule.
VI. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532,
requires that agencies prepare a written statement, which includes an
assessment of anticipated costs and benefits, before proposing any
Federal mandate that may result in excess of $100 million (adjusted
annually for inflation) in expenditures in any one year by state,
local, and tribal governments in the aggregate, or by the private
sector. However, this rulemaking applies almost entirely to private
employees on Federal contracts and is not expected to affect state,
local, or tribal governments. Please see section V.C. for an assessment
of anticipated costs and benefits to the private sector.
A few commenters discussed the cost of the proposed rule to tribes.
Elk Valley Rancheria wrote that they have ``limited staff available to
perform both direct and indirect services for federal contracts. . .
The recordkeeping requirements, ambiguity in covered contracts, limited
budgets of federal agencies, and potential penalties that could be
imposed upon the Tribe as a federal contractor could result in the
Tribe having to forego important federal contracting opportunities to
the detriment of both the Tribe and federal agencies such as the
Federal Highway Administration and the National Park Service.'' The
Chamber/IFA believes some costs may be passed on to state, local and
tribal governments and believes ``the Department neglected to identify
the various parties or types of contracts that would be implicated. The
Department has therefore not addressed these important issues in its
Unfunded Mandates Reform Act analysis.'' The Department believes that
because costs are a small share of revenues, impacts to governments and
tribes should be small.
VII. Executive Order 13132, Federalism
The Department has (1) reviewed this rule in accordance with
Executive Order 13132 regarding federalism and (2) determined that it
does not have federalism implications. The Final Rule will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.
[[Page 67709]]
VIII. Executive Order 13175, Indian Tribal Governments
This Final Rule will not have tribal implications under Executive
Order 13175 that would require a tribal summary impact statement. The
rule will not have substantial direct effects on one or more Indian
tribes, on the relationship between the Federal government and Indian
tribes, or on the distribution of power and responsibilities between
the Federal government and Indian tribes.
IX. Effects on Families
The undersigned hereby certifies that the Final Rule will not
adversely affect the well-being of families, as discussed under section
654 of the Treasury and General Government Appropriations Act, 1999.
X. Executive Order 13045, Protection of Children
This Final Rule will have no environmental health risk or safety
risk that may disproportionately affect children.
XI. Environmental Impact Assessment
A review of this Final Rule in accordance with the requirements of
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et
seq.; the regulations of the Council on Environmental Quality, 40 CFR
1500 et seq.; and the Departmental NEPA procedures, 29 CFR part 11,
indicates that the rule will not have a significant impact on the
quality of the human environment. There is, thus, no corresponding
environmental assessment or an environmental impact statement.
XII. Executive Order 13211, Energy Supply
This rule is not subject to Executive Order 13211. It will not have
a significant adverse effect on the supply, distribution, or use of
energy.
XIII. Executive Order 12630, Constitutionally Protected Property Rights
This Final Rule is not subject to Executive Order 12630 because it
does not involve implementation of a policy that has takings
implications or that could impose limitations on private property use.
XIV. Executive Order 12988, Civil Justice Reform Analysis
This Final Rule was drafted and reviewed in accordance with
Executive Order 12988 and will not unduly burden the Federal court
system. The rule was: (1) Reviewed to eliminate drafting errors and
ambiguities; (2) written to minimize litigation; and (3) written to
provide a clear legal standard for affected conduct and to promote
burden reduction.
List of Subjects in 29 CFR Part 13
Administrative practice and procedure, Construction, Government
contracts, Law enforcement, Paid sick leave, Reporting and
recordkeeping requirements.
David Weil,
Administrator, Wage and Hour Division.
0
For the reasons set out in the preamble, the Department of Labor amends
Title 29 of the Code of Federal Regulations by adding part 13 to read
as follows:
PART 13--ESTABLISHING PAID SICK LEAVE FOR FEDERAL CONTRACTORS
Subpart A--General
Sec.
13.1 Purpose and scope.
13.2 Definitions.
13.3 Coverage.
13.4 Exclusions.
13.5 Paid sick leave for Federal contractors and subcontractors.
13.6 Prohibited acts.
13.7 Waiver of rights.
13.8 Multiemployer plans or other funds, plans, or programs.
Subpart B--Federal Government Requirements
13.11 Contracting agency requirements.
13.12 Department of Labor requirements.
Subpart C--Contractor Requirements
13.21 Contract clause.
13.22 Paid sick leave.
13.23 Deductions.
13.24 Anti-kickback.
13.25 Records to be kept by contractors.
13.26 Notice.
13.27 Timing of pay.
Subpart D--Enforcement
13.41 Complaints.
13.42 Wage and Hour Division conciliation.
13.43 Wage and Hour Division investigation.
13.44 Remedies and sanctions.
Subpart E--Administrative Proceedings
13.51 Disputes concerning contractor compliance.
13.52 Debarment proceedings.
13.53 Referral to Chief Administrative Law Judge; amendment of
pleadings.
13.54 Consent findings and order.
13.55 Administrative Law Judge proceedings.
13.56 Petition for review.
13.57 Administrative Review Board proceedings.
13.58 Administrator ruling.
Appendix A to Part 13--Contract Clause
Authority: 5 U.S.C. 301; E.O. 13706, 80 FR 54697, 3 CFR, 2016
Comp., p. 367; Secretary's Order 01-2014, 79 FR 77527.
Subpart A--General
Sec. 13.1 Purpose and scope.
(a) Purpose. This part contains the Department of Labor's rules
relating to the administration and enforcement of Executive Order 13706
(Executive Order or the Order), ``Establishing Paid Sick Leave for
Federal Contractors.'' The Order states that providing paid sick leave
to employees will improve the health and performance of employees of
Federal contractors and will bring benefits packages offered by Federal
contractors in line with model employers, ensuring they remain
competitive in the search for dedicated and talented employees. The
Executive Order concludes that providing paid sick leave will result in
savings and quality improvements in the work performed by parties who
contract with the Federal Government that will in turn lead to improved
economy and efficiency in Government procurement.
(b) Policy. Executive Order 13706 sets forth the general position
of the Federal Government that providing access to paid sick leave on
Federal contracts will increase efficiency and cost savings for the
Federal Government. The Order therefore provides that executive
departments and agencies shall, to the extent permitted by law, ensure
that new covered contracts, contract-like instruments, and
solicitations (collectively referred to as ``contracts'') include a
clause, which the contractor and any subcontractors shall incorporate
into lower-tier subcontracts, specifying, as a condition of payment,
that employees will earn not less than 1 hour of paid sick leave for
every 30 hours worked on or in connection with covered contracts.
(c) Scope. Neither Executive Order 13706 nor this part creates or
changes any rights under the Contract Disputes Act or creates any
private right of action. The Executive Order provides that disputes
regarding whether a contractor has provided paid sick leave as
prescribed by the Order, to the extent permitted by law, shall be
disposed of only as provided in this part. However, nothing in the
Order or this part is intended to limit or preclude a civil action
under the False Claims Act, 31 U.S.C. 3730, or criminal prosecution
under 18 U.S.C. 1001. The Order and this part similarly do not preclude
judicial review of final decisions by the Secretary of Labor in
accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.
[[Page 67710]]
Sec. 13.2 Definitions.
For purposes of this part:
Accrual year means the 12-month period during which a contractor
may limit an employee's accrual of paid sick leave to no less than 56
hours.
Administrative Review Board (ARB or Board) means the Administrative
Review Board, U.S. Department of Labor.
Administrator means the Administrator of the Wage and Hour Division
and includes any official of the Wage and Hour Division authorized to
perform any of the functions of the Administrator under this part.
As soon as is practicable means as soon as both possible and
practical, taking into account all of the facts and circumstances of
the individual case.
Certification issued by a health care provider means any type of
written document created or signed by a health care provider (or by a
representative of the health care provider) that contains information
verifying that the physical or mental illness, injury, medical
condition, or need for diagnosis, care, or preventive care or other
need for care referred to in Sec. 13.5(c)(1)(i), (ii), or (iii)
exists. The health care provider (or representative) need not have seen
the employee or the individual for whom the employee is caring in
person to create a valid certification.
Child means:
(1) A biological, adopted, step, or foster son or daughter of the
employee;
(2) A person who is a legal ward or was a legal ward of the
employee when that individual was a minor or required a legal guardian;
(3) A person for whom the employee stands in loco parentis or stood
in loco parentis when that individual was a minor or required someone
to stand in loco parentis; or
(4) A child, as described in paragraphs (1) through (3) of this
definition, of an employee's spouse or domestic partner.
Concessions contract or contract for concessions means a contract
under which the Federal Government grants a right to use Federal
property, including land or facilities, for furnishing services. The
term concessions contract includes, but is not limited to, a contract
the principal purpose of which is to furnish food, lodging, automobile
fuel, souvenirs, newspaper stands, and/or recreational equipment,
regardless of whether the services are of direct benefit to the
Government, its personnel, or the general public.
Contract or contract-like instrument means an agreement between two
or more parties creating obligations that are enforceable or otherwise
recognizable at law. This definition includes, but is not limited to, a
mutually binding legal relationship obligating one party to furnish
services (including construction) and another party to pay for them.
The term contract includes all contracts and any subcontracts of any
tier thereunder, whether negotiated or advertised, including any
procurement actions, lease agreements, cooperative agreements, provider
agreements, intergovernmental service agreements, service agreements,
licenses, permits, or any other type of agreement, regardless of
nomenclature, type, or particular form, and whether entered into
verbally or in writing. The term contract shall be interpreted broadly
to include, but not be limited to, any contract that may be consistent
with the definition provided in the Federal Acquisition Regulation
(FAR) or applicable Federal statutes. This definition includes, but is
not limited to, any contract that may be covered under any Federal
procurement statute. Contracts may be the result of competitive bidding
or awarded to a single source under applicable authority to do so. In
addition to bilateral instruments, contracts include, but are not
limited to, awards and notices of awards; job orders or task letters
issued under basic ordering agreements; letter contracts; orders, such
as purchase orders, under which the contract becomes effective by
written acceptance or performance; and bilateral contract
modifications. The term contract includes contracts covered by the
Service Contract Act, contracts covered by the Davis-Bacon Act,
concessions contracts not subject to the Service Contract Act, and
contracts in connection with Federal property or land and related to
offering services for Federal employees, their dependents, or the
general public.
Contracting officer means a representative of an executive
department or agency with the authority to enter into, administer, and/
or terminate contracts and make related determinations and findings.
This term includes certain authorized representatives of the
contracting officer acting within the limits of their authority as
delegated by the contracting officer.
Contractor means any individual or other legal entity that is
awarded a Federal Government contract or subcontract under a Federal
Government contract. The term contractor refers to both a prime
contractor and all of its subcontractors of any tier on a contract with
the Federal Government. The term contractor includes lessors and
lessees. The term employer is used interchangeably with the terms
contractor and subcontractor in various sections of this part. The U.S.
Government, its agencies, and instrumentalities are not contractors,
subcontractors, employers, or joint employers for purposes of
compliance with the provisions of the Executive Order.
Davis-Bacon Act (DBA) means the Davis-Bacon Act of 1931, as
amended, 40 U.S.C. 3141 et seq., and its implementing regulations.
Domestic partner means an adult in a committed relationship with
another adult. A committed relationship is one in which the employee
and the domestic partner of the employee are each other's sole domestic
partner (and are not married to or domestic partners with anyone else)
and share responsibility for a significant measure of each other's
common welfare and financial obligations. This includes, but is not
limited to, any relationship between two individuals of the same or
opposite sex that is granted legal recognition by a State or by the
District of Columbia as a marriage or analogous relationship
(including, but not limited to, a civil union).
Domestic violence means:
(1) Felony or misdemeanor crimes of violence (including threats or
attempts) committed:
(i) By a current or former spouse, domestic partner, or intimate
partner of the victim;
(ii) By a person with whom the victim shares a child in common;
(iii) By a person who is cohabitating with or has cohabitated with
the victim as a spouse, domestic partner, or intimate partner;
(iv) By a person similarly situated to a spouse of the victim under
civil or criminal domestic or family violence laws of the jurisdiction
in which the victim resides or the events occurred; or
(v) By any other adult person against a victim who is protected
from that person's acts under the civil or criminal domestic or family
violence laws of the jurisdiction in which the victim resides or the
events occurred.
(2) Domestic violence also includes any crime of violence
considered to be an act of domestic violence under the civil or
criminal domestic or family violence laws of the jurisdiction in which
the victim resides or the events occurred.
Employee means any person engaged in performing work on or in
connection with a contract covered by the Executive Order, and whose
wages under such contract are governed by the Service Contract Act, the
Davis-Bacon Act, or
[[Page 67711]]
the Fair Labor Standards Act, including employees who qualify for an
exemption from the Fair Labor Standards Act's minimum wage and overtime
provisions, regardless of the contractual relationship alleged to exist
between the individual and the employer. The term employee includes any
person performing work on or in connection with a covered contract and
individually registered in a bona fide apprenticeship or training
program registered with the U.S. Department of Labor's Employment and
Training Administration, Office of Apprenticeship, or with a State
Apprenticeship Agency recognized by the Office of Apprenticeship. An
employee performs ``on'' a contract if the employee directly performs
the specific services called for by the contract. An employee performs
``in connection with'' a contract if the employee's work activities are
necessary to the performance of a contract but are not the specific
services called for by the contract.
Executive departments and agencies means executive departments
within the meaning of 5 U.S.C. 101, military departments within the
meaning of 5 U.S.C. 102, or any independent establishments within the
meaning of 5 U.S.C. 104(1) or 39 U.S.C. 201, and any wholly owned
Government corporation within the meaning of 31 U.S.C. 9101.
Executive Order 13495 or Nondisplacement Executive Order means
Executive Order 13495 of January 30, 2009, Nondisplacement of Qualified
Workers Under Service Contracts, 74 FR 6103 (Feb. 4, 2009), and its
implementing regulations at 29 CFR part 9.
Executive Order 13658 or Minimum Wage Executive Order means
Executive Order 13658 of February 12, 2014, Establishing a Minimum Wage
for Contractors, 79 FR 9851 (Feb. 20, 2014), and its implementing
regulations at 29 CFR part 10.
Fair Labor Standards Act (FLSA) means the Fair Labor Standards Act
of 1938, as amended, 29 U.S.C. 201 et seq., and its implementing
regulations.
Family and Medical Leave Act (FMLA) means the Family and Medical
Leave Act of 1993, as amended, 29 U.S.C. 2601 et seq., and its
implementing regulations.
Family violence means any act or threatened act of violence,
including any forceful detention of an individual that results or
threatens to result in physical injury and is committed by a person
against another individual (including an elderly individual) to or with
whom such person is related by blood, is or was related by marriage or
is or was otherwise legally related, or is or was lawfully residing.
Federal Government means an agency or instrumentality of the United
States that enters into a contract pursuant to authority derived from
the Constitution or the laws of the United States. For purposes of the
Executive Order and this part, this definition does not include the
District of Columbia, any Territory or possession of the United States,
or any independent regulatory agency within the meaning of 44 U.S.C.
3502(5).
Health care provider means any practitioner who is licensed or
certified under Federal or State law to provide the health-related
service in question or any practitioner recognized by an employer or
the employer's group health plan. The term includes, but is not limited
to, doctors of medicine or osteopathy, podiatrists, dentists,
psychologists, optometrists, chiropractors, nurse practitioners, nurse-
midwives, clinical social workers, physician assistants, physical
therapists, and Christian Science Practitioners listed with the First
Church of Christ, Scientist in Boston, Massachusetts.
Independent agencies means independent regulatory agencies within
the meaning of 44 U.S.C. 3502(5).
Individual related by blood or affinity whose close association
with the employee is the equivalent of a family relationship means any
person with whom the employee has a significant personal bond that is
or is like a family relationship, regardless of biological or legal
relationship.
Intimate partner means a person who is or has been in a social
relationship of a romantic or intimate nature with the victim, where
the existence of such a relationship shall be determined based on a
consideration of the length of the relationship; the type of
relationship; and the frequency of interaction between the persons
involved in the relationship.
Multiemployer plan means a plan to which more than one employer is
required to contribute and which is maintained pursuant to one or more
collective bargaining agreements between one or more employee
organizations and more than one employer.
New contract means a contract that results from a solicitation
issued on or after January 1, 2017, or a contract that is awarded
outside the solicitation process on or after January 1, 2017. This term
includes both new contracts and replacements for expiring contracts. It
does not apply to the unilateral exercise of a pre-negotiated option to
renew an existing contract by the Federal Government. For purposes of
the Executive Order, a contract that is entered into prior to January
1, 2017 will constitute a new contract if, through bilateral
negotiation, on or after January 1, 2017:
(1) The contract is renewed;
(2) The contract is extended, unless the extension is made pursuant
to a term in the contract as of December 31, 2016 providing for a
short-term limited extension; or
(3) The contract is amended pursuant to a modification that is
outside the scope of the contract.
Obtain additional counseling, seek relocation, seek assistance from
a victim services organization, or take related legal action, used in
reference to domestic violence, sexual assault, or stalking, means to
spend time arranging, preparing for, or executing acts related to
addressing physical injuries or mental or emotional impacts resulting
from being a victim of domestic violence, sexual assault, or stalking.
Such acts include finding and using services of a counselor or victim
services organization intended to assist a victim to respond to or
prevent future incidents of domestic violence, sexual assault, or
stalking; identifying and moving to a different residence to avoid
being a victim of domestic violence, sexual assault, or stalking; or a
victim's pursuing any related legal action.
Obtaining diagnosis, care, or preventive care from a health care
provider means receiving services from a health care provider, whether
to identify, treat, or otherwise address an existing condition or to
prevent potential conditions from arising. The term includes time spent
traveling to and from the location at which such services are provided
or recovering from receiving such services.
Office of Administrative Law Judges means the Office of
Administrative Law Judges, U.S. Department of Labor.
Option means a unilateral right in a contract by which, for a
specified time, the Government may elect to purchase additional
supplies or services called for by the contract, or may elect to extend
the term of the contract.
Paid sick leave means compensated absence from employment that is
required by Executive Order 13706 and this part.
Parent means:
(1) A biological, adoptive, step, or foster parent of the employee,
or a person who was a foster parent of the employee when the employee
was a minor;
(2) A person who is the legal guardian of the employee or was the
legal guardian of the employee when the
[[Page 67712]]
employee was a minor or required a legal guardian;
(3) A person who stands in loco parentis to the employee or stood
in loco parentis to the employee when the employee was a minor or
required someone to stand in loco parentis; or
(4) A parent, as described in paragraphs (1) through (3) of this
definition, of an employee's spouse or domestic partner.
Physical or mental illness, injury, or medical condition means any
disease, sickness, disorder, or impairment of, or any trauma to, the
body or mind.
Procurement contract for construction means a procurement contract
for the construction, alteration, or repair (including painting and
decorating) of public buildings or public works and which requires or
involves the employment of mechanics or laborers, and any subcontract
of any tier thereunder. The term procurement contract for construction
includes any contract subject to the Davis-Bacon Act.
Procurement contract for services means a contract the principal
purpose of which is to furnish services in the United States through
the use of service employees, and any subcontract of any tier
thereunder. The term procurement contract for services includes any
contract subject to the Service Contract Act.
Related legal action or related civil or criminal legal proceeding,
used in reference to domestic violence, sexual assault, or stalking,
means any type of legal action, in any forum, that relates to the
domestic violence, sexual assault, or stalking, including, but not
limited to, family, tribal, territorial, immigration, employment,
administrative agency, housing matters, campus administrative or
protection or stay-away order proceedings, and other similar matters;
and criminal justice investigations, prosecutions, and post-trial
matters (including sentencing, parole, and probation) that impact the
victim's safety and privacy.
Secretary means the Secretary of Labor and includes any official of
the U.S. Department of Labor authorized to perform any of the functions
of the Secretary of Labor under this part.
Service Contract Act (SCA) means the McNamara-O'Hara Service
Contract Act of 1965, as amended, 41 U.S.C. 6701 et seq., and its
implementing regulations.
Sexual assault means any nonconsensual sexual act proscribed by
Federal, tribal, or State law, including when the victim lacks capacity
to consent.
Solicitation means any request to submit offers, bids, or
quotations to the Federal Government.
Spouse means the other person with whom an individual entered into
marriage as defined or recognized under State law for purposes of
marriage in the State in which the marriage was entered into or, in the
case of a marriage entered into outside of any State, if the marriage
is valid in the place where entered into and could have been entered
into in at least one State. This definition includes an individual in a
common law marriage that was entered into in a State that recognizes
such marriages or, if entered into outside of any State, is valid in
the place where entered into and could have been entered into in at
least one State.
Stalking means engaging in a course of conduct directed at a
specific person that would cause a reasonable person to fear for his or
her safety or the safety of others or suffer substantial emotional
distress.
United States means the United States and all executive
departments, independent establishments, administrative agencies, and
instrumentalities of the United States, including corporations of which
all or substantially all of the stock is owned by the United States, by
the foregoing departments, establishments, agencies, and
instrumentalities, including nonappropriated fund instrumentalities.
When used in a geographic sense, the United States means the 50 States
and the District of Columbia.
Victim services organization means a nonprofit, nongovernmental, or
tribal organization or rape crisis center, including a State or tribal
coalition, that assists or advocates for victims of domestic violence,
sexual assault, or stalking, including domestic violence shelters,
faith-based organizations, and other organizations, with a documented
history of effective work concerning domestic violence, sexual assault,
or stalking.
Violence Against Women Act (VAWA) means the Violence Against Women
Act of 1994, 42 U.S.C. 13925 et seq., and its implementing regulations.
Wage and Hour Division means the Wage and Hour Division, U.S.
Department of Labor.
Sec. 13.3 Coverage.
(a) This part applies to any new contract with the Federal
Government, unless excluded by Sec. 13.4, provided that:
(1)(i) It is a procurement contract for construction covered by the
Davis-Bacon Act;
(ii) It is a contract for services covered by the Service Contract
Act;
(iii) It is a contract for concessions, including any concessions
contract excluded from coverage under the Service Contract Act by
Department of Labor regulations at Sec. 4.133(b); or
(iv) It is a contract in connection with Federal property or lands
and related to offering services for Federal employees, their
dependents, or the general public; and
(2) The wages of employees performing on or in connection with such
contract are governed by the Davis-Bacon Act, the Service Contract Act,
or the Fair Labor Standards Act, including employees who qualify for an
exemption from the Fair Labor Standards Act's minimum wage and overtime
provisions.
(b) For contracts covered by the Service Contract Act or the Davis-
Bacon Act, this part applies to prime contracts only at the thresholds
specified in those statutes. For procurement contracts where employees'
wages are governed by the Fair Labor Standards Act, this part applies
when the prime contract exceeds the micro-purchase threshold, as
defined in 41 U.S.C. 1902(a). For all other prime contracts covered by
Executive Order 13706 and this part and for all subcontracts awarded
under prime contracts covered by Executive Order 13706 and this part,
this part applies regardless of the value of the contract.
(c) This part only applies to contracts with the Federal Government
requiring performance in whole or in part within the United States. If
a contract with the Federal Government is to be performed in part
within and in part outside the United States and is otherwise covered
by the Executive Order and this part, the requirements of the Order and
this part would apply with respect to that part of the contract that is
performed within the United States.
(d) This part does not apply to contracts for the manufacturing or
furnishing of materials, supplies, articles, or equipment to the
Federal Government, including those that are subject to the Walsh-
Healey Public Contracts Act, 41 U.S.C. 6501 et seq.
Sec. 13.4 Exclusions.
(a) Grants. The requirements of this part do not apply to grants
within the meaning of the Federal Grant and Cooperative Agreement Act,
as amended, 31 U.S.C. 6301 et seq.
(b) Contracts and agreements with and grants to Indian Tribes. This
part does not apply to contracts and agreements with and grants to
Indian Tribes under the Indian Self-Determination and Education
Assistance Act, as amended, 25 U.S.C. 450 et seq.
[[Page 67713]]
(c) Procurement contracts for construction that are excluded from
coverage of the Davis-Bacon Act. Procurement contracts for construction
that are not covered by the Davis-Bacon Act are not subject to this
part.
(d) Contracts for services that are exempted from coverage under
the Service Contract Act. Service contracts, except for those expressly
covered by Sec. 13.3(a)(1)(iii) or (iv), that are exempt from coverage
of the Service Contract Act pursuant to its statutory language at 41
U.S.C. 6702(b) or its implementing regulations, including those at
Sec. 4.115 through 4.122 and Sec. 4.123(d) and (e), are not subject
to this part.
(e) Employees performing in connection with covered contracts for
less than 20 percent of their work hours in a given workweek. The
accrual requirements of this part do not apply to employees performing
in connection with covered contracts, i.e., those employees who perform
work duties necessary to the performance of the contract but who are
not directly engaged in performing the specific work called for by the
contract, who spend less than 20 percent of their hours worked in a
particular workweek performing in connection with such contracts. This
exclusion is inapplicable to employees performing on covered contracts,
i.e., those employees directly engaged in performing the specific work
called for by the contract, at any point during the workweek. This
exclusion is also inapplicable to employees performing in connection
with covered contracts with respect to any workweek in which the
employees spend 20 percent or more of their hours worked performing in
connection with a covered contract.
(f) Employees whose covered work is governed by a collective
bargaining agreement that already provides 56 hours of paid sick time.
If a collective bargaining agreement ratified before September 30, 2016
applies to an employee's work performed on or in connection with a
covered contract and provides the employee with at least 56 hours (or 7
days, if the agreement refers to days rather than hours) of paid sick
time (or paid time off that may be used for reasons related to sickness
or health care) each year, the requirements of the Executive Order and
this part do not apply to the employee until the earlier of the date
the agreement terminates or January 1, 2020. If a collective bargaining
agreement ratified before September 30, 2016 applies to an employee's
work performed on or in connection with a covered contract and provides
the employee with paid sick time (or paid time off that may be used for
reasons related to sickness or health care) each year, but the amount
of such leave provided under the agreement is less than 56 hours (or 7
days, if the agreement refers to days rather than hours), the
requirements of the Executive Order and this part do not apply to the
employee until the earlier of the date the agreement terminates or
January 1, 2020, provided that each year the contractor provides
covered employees with the difference between 56 hours (or 7 days) and
the amount provided under the existing agreement in a manner consistent
with either the Executive Order and this part or the terms and
conditions of the collective bargaining agreement.
Sec. 13.5 Paid sick leave for Federal contractors and subcontractors.
(a) Accrual. (1) A contractor shall permit an employee to accrue
not less than 1 hour of paid sick leave for every 30 hours worked on or
in connection with a covered contract. A contractor shall aggregate an
employee's hours worked on or in connection with all covered contracts
for that contractor for purposes of paid sick leave accrual.
(i) Hours worked has the same meaning for purposes of Executive
Order 13706 and this part as it does under the Fair Labor Standards
Act, as set forth in 29 CFR part 785. To properly exclude time spent on
non-covered work from an employee's hours worked that count toward the
accrual of paid sick leave, a contractor must accurately identify in
its records the employee's covered and non-covered hours worked, or, if
the employee performs work in connection with rather than on covered
contracts, a contractor may estimate the portion of an employee's hours
worked spent in connection with covered contracts provided the estimate
is reasonable and based on verifiable information.
(ii) A contractor shall calculate an employee's accrual of paid
sick leave no less frequently than at the conclusion of each pay period
or each month, whichever interval is shorter. A contractor need not
allow an employee to accrue paid sick leave in increments smaller than
1 hour for completion of any fraction of 30 hours worked. Any such
fraction of hours worked shall be added to hours worked for the same
contractor in subsequent pay periods to reach the next 30 hours worked
provided that the next pay period in which the employee performs on or
in connection with a covered contract occurs within the same accrual
year.
(iii) If a contractor is not obligated by the Service Contract Act,
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an
employee's hours worked, such as because the employee is employed in a
bona fide executive, administrative, or professional capacity as those
terms are defined in 29 CFR part 541, the contractor may, as to that
employee, calculate paid sick leave accrual by tracking the employee's
actual hours worked or by using the assumption that the employee works
40 hours on or in connection with a covered contract in each workweek.
If such an employee regularly works fewer than 40 hours per week on or
in connection with covered contracts, whether because the employee's
time is split between covered and non-covered contracts or because the
employee has a part-time schedule, the contractor may allow the
employee to accrue paid sick leave based on the employee's typical
number of hours worked on or in connection with covered contracts per
workweek provided the contractor has probative evidence to support the
number it uses or, if the employee performs work in connection with
rather than on covered contracts, a contractor may estimate the
employee's typical number of hours worked in connection with covered
contracts per workweek provided the estimate is reasonable and based on
verifiable information.
(2) A contractor shall inform an employee, in writing, of the
amount of paid sick leave that the employee has accrued but not used no
less than once each pay period or each month, whichever interval is
shorter, as well as upon a separation from employment and upon
reinstatement of paid sick leave pursuant to paragraph (b)(4) of this
section. A contractor's existing procedure for informing employees of
their available leave, such as notification accompanying each paycheck
or an online system an employee can check at any time, may be used to
satisfy or partially satisfy these requirements provided it is written
(including electronically, if the contractor customarily corresponds
with or makes information available to its employees by electronic
means).
(3) A contractor may choose to provide an employee with at least 56
hours of paid sick leave at the beginning of each accrual year rather
than allowing the employee to accrue such leave based on hours worked
over time.
(i) If a contractor chooses to use the option described in this
paragraph, the contractor need not comply with the accrual requirements
described in paragraph (a)(1) of this section. The contractor must,
however, allow carryover of paid sick leave as required by paragraph
(b)(2) of this section, and
[[Page 67714]]
although the contractor may limit the amount of paid sick leave an
employee may carry over to no less than 56 hours, the contractor may
not limit the amount of paid sick leave an employee has available for
use at any point as is otherwise permitted by paragraph (b)(3) of this
section.
(ii) If a contractor chooses to use the option described in this
paragraph and the contractor hires an employee or newly assigns the
employee to work on or in connection with a covered contract after the
beginning of the accrual year, the contractor may provide the employee
with a prorated amount of paid sick leave based on the number of pay
periods remaining in the accrual year.
(iii) A contractor may use the option described in this paragraph
as to any or all of its employees in any or all accrual years.
(b) Maximum accrual, carryover, reinstatement, and payment for
unused leave. (1) A contractor may limit the amount of paid sick leave
an employee is permitted to accrue to not less than 56 hours in each
accrual year. An accrual year is a 12-month period beginning on the
date an employee's work on or in connection with a covered contract
began or any other fixed date chosen by the contractor, such as the
date a covered contract began, the date the contractor's fiscal year
begins, a date relevant under State law, or the date a contractor uses
for determining employees' leave entitlements under the FMLA pursuant
to Sec. 825.200 of this title. A contractor may choose its accrual
year but must use a consistent option for all, or across similarly
situated groups of, employees and may not select or change any
employee's accrual year in order to avoid the paid sick leave
requirements of Executive Order 13706 and this part.
(2) Paid sick leave shall carry over from one accrual year to the
next. Paid sick leave carried over from the previous accrual year shall
not count toward any limit the contractor sets on annual accrual.
(3) A contractor may limit the amount of paid sick leave an
employee is permitted to have available for use at any point to not
less than 56 hours. Accordingly, even if an employee has accrued fewer
than 56 hours of paid sick leave since the beginning of the accrual
year, the employee need only be permitted to accrue additional paid
sick leave if the employee has fewer than 56 hours available for use.
(4) Paid sick leave shall be reinstated for employees rehired by
the same contractor within 12 months after a job separation. This
reinstatement requirement applies whether the employee leaves and
returns to a job on or in connection with a single covered contract or
works for a single contractor on or in connection with more than one
covered contract, regardless of whether the employee remains employed
by the contractor in between periods of working on covered contracts.
(5) Nothing in Executive Order 13706 or this part shall require a
contractor to make a financial payment to an employee for accrued paid
sick leave that has not been used upon a separation from employment. If
a contractor nevertheless makes such a payment in an amount equal to or
greater than the value of the pay and benefits the employee would have
received pursuant to paragraph (c)(3) of this section had the employee
used the paid sick leave, the contractor is relieved of the obligation
to reinstate an employee's accrued paid sick leave upon rehiring the
employee within 12 months of the separation pursuant to paragraph
(b)(4) of this section.
(c) Use. (1) Subject to the conditions described in paragraphs (d)
and (e) of this section and the amount of paid sick leave the employee
has available for use, a contractor must permit an employee to use paid
sick leave to be absent from work for that contractor during time the
employee would have been performing work on or in connection with a
covered contract or, if the contractor estimates the employee's hours
worked in connection with such contracts for purposes of accrual,
during any work time because of:
(i) A physical or mental illness, injury, or medical condition of
the employee;
(ii) Obtaining diagnosis, care, or preventive care from a health
care provider by the employee;
(iii) Caring for the employee's child, parent, spouse, domestic
partner, or any other individual related by blood or affinity whose
close association with the employee is the equivalent of a family
relationship who has any of the conditions or needs for diagnosis,
care, or preventive care referred to in paragraphs (c)(1)(i) or (ii) of
this section or is otherwise in need of care; or
(iv) Domestic violence, sexual assault, or stalking, if the time
absent from work is for the purposes otherwise described in paragraphs
(c)(1)(i) or (ii) of this section or to obtain additional counseling,
seek relocation, seek assistance from a victim services organization,
take related legal action, including preparation for or participation
in any related civil or criminal legal proceeding, or assist an
individual related to the employee as described in paragraph
(c)(1)(iii) of this section in engaging in any of these activities.
(2) A contractor shall account for an employee's use of paid sick
leave in increments of no greater than 1 hour.
(i) A contractor may not reduce an employee's accrued paid sick
leave by more than the amount of time the employee is actually absent
from work, and a contractor may not require an employee to use more
leave than is necessary to address the circumstances that precipitated
the need for the leave, provided that the leave is counted using an
increment of no greater than 1 hour.
(ii) The amount of paid sick leave used may not exceed the hours an
employee would have worked if the need for leave had not arisen.
(iii) If it is physically impossible for an employee using paid
sick leave to commence or end work mid-way through a shift, such as if
a flight attendant or a railroad conductor is scheduled to work aboard
an airplane or train, or a laboratory employee is unable to enter or
leave a sealed ``clean room'' during a certain period of time, and no
equivalent position is available, the entire period that the employee
is forced to be absent constitutes paid sick leave. The period of the
physical impossibility is limited to the period during which the
contractor is unable to permit the employee to work prior to the use of
paid sick leave or return the employee to the same or an equivalent
position due to the physical impossibility after the use of paid sick
leave.
(3) A contractor shall provide to an employee using paid sick leave
the same regular pay and benefits the employee would have received had
the employee not been absent from work. Regular pay means payments that
would be included in the calculation of the employee's regular rate for
hours worked under the Fair Labor Standards Act as set forth in 29 CFR
part 778.
(4) A contractor may not limit the amount of paid sick leave an
employee may use per year or at once on any basis other than the amount
of paid sick leave an employee has available.
(5) An employee is encouraged to make a reasonable effort to
schedule preventive care or another foreseeable need to use paid sick
leave to suit the needs of both the contractor and employee, and a
contractor may ask an employee to make a reasonable effort to schedule
foreseeable paid sick leave so as to not disrupt unduly the
contractor's operations, but a contractor may not make an employee's
use of paid sick leave contingent on the employee's finding a
replacement worker to cover any work time to be missed or on the
[[Page 67715]]
fulfillment of the contractor's operational needs.
(d) Request for leave. (1) A contractor shall permit an employee to
use any or all of the employee's available paid sick leave upon the
oral or written request of an employee that includes information
sufficient to inform the contractor that the employee is seeking to be
absent from work for a purpose described in paragraph (c)(1) of this
section and, to the extent reasonably feasible, the anticipated
duration of the leave.
(i) An employee's request to use paid sick leave need not include a
specific reference to the Executive Order or this part or even use the
words ``sick leave'' or ``paid sick leave,'' and a contractor may not
require an employee to provide extensive or detailed information about
the need to be absent from work or the employee's family or family-like
relationship with an individual for whom the employee is requesting to
care.
(ii) Although an employee shall make a good faith effort to provide
a reasonable estimate of the length of the requested absence from work,
a contractor shall permit the employee to return to work earlier, or
continue to use available paid sick leave for longer, than anticipated.
(iii) The employee's request shall be directed to the appropriate
personnel pursuant to a contractor's policy or, in the absence of a
formal policy, any personnel who typically receive requests for other
types of leave or otherwise address scheduling issues on behalf of the
contractor.
(iv) The contractor shall maintain the confidentiality of any
medical or other personal information contained in an employee's
request to use paid sick leave as required by Sec. 13.25(d).
(2) If the need for leave is foreseeable, the employee's request
shall be made at least 7 calendar days in advance. If the employee is
unable to request paid sick leave at least 7 calendar days in advance,
the request shall be made as soon as is practicable. When an employee
becomes aware of a need to use paid sick leave less than 7 calendar
days in advance, it should typically be practicable for the employee to
make a request for leave either the day the employee becomes aware of
the need to use paid sick leave or the next business day. In all cases,
however, the determination of when an employee could practicably make a
request must take into account the individual facts and circumstances.
(3)(i) A contractor may communicate its grant of a request to use
paid sick leave either orally or in writing (including electronically,
if the contractor customarily corresponds with or makes information
available to its employees by such means).
(ii) A contractor shall communicate any denial of a request to use
paid sick leave in writing (including electronically, if the contractor
customarily corresponds with or makes information available to its
employees by such means), with an explanation for the denial. Denial is
appropriate if, for example, the employee did not provide sufficient
information about the need for paid sick leave; the reason given is not
consistent with the uses of paid sick leave described in paragraph
(c)(1) of this section; the employee did not indicate when the need
would arise; the employee has not accrued, and will not have accrued by
the date of leave anticipated in the request, a sufficient amount of
paid sick leave to cover the request (in which case, if the employee
will have any paid sick leave available for use, only a partial denial
is appropriate); or the request is to use paid sick leave during time
the employee is scheduled to be performing non-covered work. If the
denial is based on insufficient information provided in the request,
such as if the employee did not state the time of an appointment with a
health care provider, the contractor must permit the employee to submit
a new, corrected request. If the denial is based on an employee's
request to use paid sick leave during time she is scheduled to be
performing non-covered work, the denial must be supported by records
adequately segregating the employee's time spent on covered and non-
covered contracts.
(iii) A contractor shall respond to any request to use paid sick
leave as soon as is practicable after the request is made. Although the
determination of when it is practicable for a contractor to provide a
response will take into account the individual facts and circumstances,
it should in many circumstances be practicable for the contractor to
respond to a request immediately or within a few hours. In some
instances, however, such as if it is unclear at the time of the request
whether the employee will be working on or in connection with a covered
or non-covered contract at the time for which paid sick leave is
requested, as soon as practicable could mean within a day or no longer
than within a few days.
(e) Certification or documentation for leave of 3 or more
consecutive full workdays. (1)(i) A contractor may require
certification issued by a health care provider to verify the need for
paid sick leave used for a purpose described in paragraphs (c)(1)(i),
(ii), or (iii) of this section only if the employee is absent for 3 or
more consecutive full workdays. The contractor shall protect the
confidentiality of any certification as required by Sec. 13.25(d).
(ii) A contractor may only require documentation from an
appropriate individual or organization to verify the need for paid sick
leave used for a purpose described in paragraph (c)(1)(iv) of this
section only if the employee is absent for 3 or more consecutive full
workdays. The source of such documentation may be any person involved
in providing or assisting with the care, counseling, relocation,
assistance of a victim services organization, or related legal action,
such as, but not limited to, a health care provider, counselor,
representative of a victim services organization, attorney, clergy
member, family member, or close friend. Self-certification is also
permitted. The contractor may only require that such documentation
contain the minimum necessary information establishing a need for the
employee to be absent from work. The contractor shall not disclose any
verification information and shall maintain confidentiality about the
domestic abuse, sexual assault, or stalking, as required by Sec.
13.25(d).
(2) If certification or documentation is to verify the illness,
injury, or condition, need for diagnosis, care, or preventive care, or
activity related to domestic violence, sexual assault, or stalking of
an individual related to the employee as described in paragraph
(c)(1)(iii) of this section, a contractor may also require the employee
to provide reasonable documentation or a statement of the family or
family-like relationship. This documentation may take the form of a
simple written statement from the employee or could be a legal or other
document proving the relationship, such as a birth certificate or court
order.
(3)(i) A contractor may only require certification or documentation
if the contractor informs an employee before the employee returns to
work that certification or documentation will be required to verify the
use of paid sick leave if the employee is absent for 3 or more
consecutive full workdays. The contractor may inform an employee of
this requirement each time the employee requests to use or does use
paid sick leave, or the contractor may inform employees of a general
policy to require certification or documentation for absences of 3 or
more consecutive full workdays if it does so in a manner reasonably
calculated to provide actual notice of the requirement to employees.
(ii) A contractor may require the employee to provide certification
or documentation within 30 days of the
[[Page 67716]]
first day of the 3 or more consecutive full workdays of paid sick leave
but may not set a shorter deadline for its submission.
(iii) While a contractor is waiting for or reviewing certification
or documentation, it must treat the employee's otherwise proper request
for 3 or more consecutive full workdays of paid sick leave as valid. If
the employee provides certification or documentation that is
insufficient to verify the employee's need for paid sick leave, the
contractor shall notify the employee of the deficiency and allow the
employee at least 5 days to provide new or supplemental certification
or documentation. If after 30 days the employee has not provided any
certification or documentation, or if after the 5 or more days allowed
for resubmission the employee has either provided no new or
supplemental certification or documentation or the new certification or
documentation is still insufficient to verify the employee's need for
paid sick leave, the contractor may, within 10 calendar days of the
employee's deadline for providing sufficient certification or
documentation, retroactively deny the employee's request to use paid
sick leave. In such circumstances, the contractor may recover the value
of the pay and benefits the employee received but to which the employee
was not entitled, including through deduction from any sums due to the
employee (e.g., unpaid wages, vacation pay, profit sharing, etc.),
provided such deductions do not otherwise violate applicable Federal,
State, or local wage payment or other laws.
(4) A contractor may contact the health care provider or other
individual who created or signed the certification or documentation
only for purposes of authenticating the document or clarifying its
contents. The contractor may not request additional details about the
medical or other condition referenced, seek a second opinion, or
otherwise question the substance of the certification. To make such
contact, the contractor must use a human resources professional, a
leave administrator, or a management official. The employee's direct
supervisor may not contact the employee's health care provider unless
there is no other appropriate individual who can do so. The
requirements of the Health Insurance Portability and Accountability Act
(HIPAA) Privacy Rule, set forth at 45 CFR parts 160 and 164, must be
satisfied when individually identifiable health information of an
employee is shared with a contractor by a HIPAA-covered health care
provider.
(f) Interaction with other laws and paid time off policies. (1)
General. Nothing in Executive Order 13706 or this part shall excuse
noncompliance with or supersede any applicable Federal or State law,
any applicable law or municipal ordinance, or a collective bargaining
agreement requiring greater paid sick leave or leave rights than those
established under the Executive Order and this part.
(2) SCA and DBA requirements. (i) Paid sick leave required by
Executive Order 13706 and this part is in addition to a contractor's
obligations under the Service Contract Act and Davis-Bacon Act. A
contractor may not receive credit toward its prevailing wage or fringe
benefit obligations under those Acts for any paid sick leave provided
in satisfaction of the requirements of Executive Order 13706 and this
part.
(ii) A contractor may count the value of any paid sick time
provided in excess of the requirements of Executive Order 13706 and
this part (and any other law) toward its obligations under the Service
Contract Act or Davis-Bacon Act in keeping with the requirements of
those Acts.
(3) FMLA. A contractor's obligations under the Executive Order and
this part have no effect on its obligations to comply with, or ability
to act pursuant to, the Family and Medical Leave Act. Paid sick leave
may be substituted for (that is, may run concurrently with) unpaid FMLA
leave under the same conditions as other paid time off pursuant to
Sec. 825.207 of this title. As to time off that is designated as FMLA
leave and for which an employee uses paid sick leave, all notices and
certifications that satisfy the FMLA requirements set forth at Sec.
825.300 through 300.308 of this title will satisfy the request for
leave and certification requirements of paragraphs (d) and (e) of this
section.
(4) State and local paid sick time laws. A contractor's compliance
with a State or local law requiring that employees be provided with
paid sick time does not excuse the contractor from compliance with any
of its obligations under the Executive Order 13706 or this part. A
contractor may, however, satisfy its obligations under the Order and
this part by providing paid sick time that fulfills the requirements of
a State or local law provided that the paid sick time is accrued and
may be used in a manner that meets or exceeds all of the requirements
of the Order and this part including but not limited to the accrual and
use requirements in this section and the prohibitions on interference
and discrimination in Sec. 13.6. Where the requirements of an
applicable State or local law and the Order and this part differ,
satisfying both will require a contractor to comply with the
requirement that is more generous to employees.
(5) Paid time off policies. (i) The paid sick leave requirements of
Executive Order 13706 and this part need not have any effect on a
contractor's voluntary paid time off policy, whether provided pursuant
to a collective bargaining agreement or otherwise.
(ii) A contractor's existing paid time off policy (if provided in
addition to the fulfillment of Service Contract Act or Davis-Bacon Act
obligations, if applicable) will satisfy the requirements of the
Executive Order and this part if the paid time off is made available to
all employees described in Sec. 13.3(a)(2) (other than those excluded
by Sec. 13.4(e)); may be used for at least all of the purposes
described in paragraph (c)(1) of this section; is provided in a manner
and an amount sufficient to comply with the rules and restrictions
regarding the accrual of paid sick leave set forth in paragraph (a) of
this section and regarding maximum accrual, carryover, reinstatement,
and payment for unused leave set forth in paragraph (b) of this
section; is provided pursuant to policies sufficient to comply with the
rules and restrictions regarding use of paid sick leave set forth in
paragraph (c) of this section, regarding requests for leave set forth
in paragraph (d) of this section, and regarding certification and
documentation set forth in paragraph (e) of this section, at least with
respect to any paid time off used for the purposes described in
paragraph (c)(1) of this section; and is protected by the prohibitions
against interference, discrimination, and recordkeeping violations
described in Sec. 13.6 and the prohibition against waiver of rights
described in Sec. 13.7, at least with respect to any paid time off
used for the purposes described in paragraph (c)(1) of this section.
(iii) A contractor satisfying the requirements of the Executive
Order and this part with a paid time off policy that provides more than
56 hours of leave per accrual year may choose to either provide all
paid time off as described in paragraph (f)(5)(ii) of this section or
track, and make and maintain records reflecting, the amount of paid
time off an employee uses for the purposes described in paragraph
(c)(1) of this section, in which case the contractor need only provide,
for each accrual year, up to 56 hours of paid time off the employee
requests to use for such purposes in compliance with the Order and this
part.
[[Page 67717]]
Sec. 13.6 Prohibited acts.
(a) Interference. (1) A contractor may not in any manner interfere
with an employee's accrual or use of paid sick leave as required by
Executive Order 13706 or this part.
(2) Interference includes, but is not limited to, miscalculating
the amount of paid sick leave an employee has accrued, denying or
unreasonably delaying a response to a proper request to use paid sick
leave, discouraging an employee from using paid sick leave, reducing an
employee's accrued paid sick leave by more than the amount of such
leave used, transferring the employee to work on non-covered contracts
to prevent the accrual or use of paid sick leave, disclosing
confidential information contained in certification or other
documentation provided to verify the need to use paid sick leave, or
making the use of paid sick leave contingent on the employee's finding
a replacement worker or the fulfillment of the contractor's operational
needs.
(b) Discrimination. (1) A contractor may not discharge or in any
other manner discriminate against any employee for:
(i) Using, or attempting to use, paid sick leave as provided for
under Executive Order 13706 and this part;
(ii) Filing any complaint, initiating any proceeding, or otherwise
asserting any right or claim under Executive Order 13706 or this part;
(iii) Cooperating in any investigation or testifying in any
proceeding under Executive Order 13706 or this part; or
(iv) Informing any other person about his or her rights under
Executive Order 13706 or this part.
(2) Discrimination includes, but is not limited to, a contractor's
considering any of the activities described in paragraph (b)(1) of this
section as a negative factor in employment actions, such as hiring,
promotions, or disciplinary actions, or a contractor's counting paid
sick leave under a no fault attendance policy.
(c) Recordkeeping. A contractor's failure to make and maintain or
to make available to authorized representatives of the Wage and Hour
Division records for inspection, copying, and transcription as required
by Sec. 13.25, or any other failure to comply with the requirements of
Sec. 13.25, constitutes a violation of Executive Order 13706, this
part, and the underlying contract.
Sec. 13.7 Waiver of rights.
Employees cannot waive, nor may contractors induce employees to
waive, their rights under Executive Order 13706 or this part.
Sec. 13.8 Multiemployer plans or other funds, plans, or programs.
(a) A contractor may fulfill its obligations under Executive Order
13706 and this part jointly with other contractors--that is, as though
all of the contractors are a single contractor--through a multiemployer
plan that provides paid sick leave in compliance with the rules and
requirements of Executive Order 13706 and this part. Regardless of what
functions the plan performs, each contractor remains responsible for
any violation of the Order or this part that occurs during its
employment of the employee.
(b) Nothing in this part prohibits a contractor from providing paid
sick leave through a fund, plan, or program. Regardless of the manner
in which a contractor provides paid sick leave or what functions any
fund, plan, or program performs, the contractor remains responsible for
any violation of the Order or this part with respect to any of its
employees.
Subpart B--Federal Government Requirements
Sec. 13.11 Contracting agency requirements.
(a) Contract clause. The contracting agency shall include the
Executive Order paid sick leave contract clause set forth in Appendix A
of this part in all covered contracts and solicitations for such
contracts, as described in Sec. 13.3, except for procurement contracts
subject to the FAR. The required contract clause directs, as a
condition of payment, that all employees performing work on or in
connection with covered contracts shall be provided paid sick leave as
required by Executive Order 13706 and this part. For procurement
contracts subject to the FAR, contracting agencies must use the clause
set forth in the FAR developed to implement this rule. Such clause will
accomplish the same purposes as the clause set forth in Appendix A and
be consistent with the requirements set forth in this rule.
(b) Failure to include the contract clause. Where the Department of
Labor or the contracting agency discovers or determines, whether before
or subsequent to a contract award, that a contracting agency made an
erroneous determination that Executive Order 13706 and this part did
not apply to a particular contract and/or failed to include the
applicable contract clause in a contract to which the Executive Order
and this part apply, the contracting agency, on its own initiative or
within 15 calendar days of notification by an authorized representative
of the Department of Labor, shall incorporate the contract clause in
the contract retroactive to commencement of performance under the
contract through the exercise of any and all authority that may be
needed (including, where necessary, its authority to negotiate or
amend, its authority to pay any necessary additional costs, and its
authority under any contract provision authorizing changes,
cancellation, and termination).
(c) Withholding. A contracting officer shall, upon his or her own
action or upon written request of the Administrator, withhold or cause
to be withheld from the prime contractor under the covered contract or
any other Federal contract with the same prime contractor, so much of
the accrued payments or advances as may be considered necessary to pay
employees the full amount owed to compensate for any violation of
Executive Order 13706 or this part. In the event of any such violation,
the agency may, after authorization or by direction of the
Administrator and written notification to the contractor, take action
to cause suspension of any further payment, advance, or guarantee of
funds until such violations have ceased. Additionally, any failure to
comply with the requirements of Executive Order 13706 or this part may
be grounds for termination of the right to proceed with the contract
work. In such event, the contracting agency may enter into other
contracts or arrangements for completion of the work, charging the
contractor in default with any additional cost.
(d) Suspending payment. A contracting officer shall, upon his or
her own action or upon the direction of the Administrator and
notification of the contractor, take action to cause suspension of any
further payment, advance, or guarantee of funds to a contractor that
has failed to make available for inspection, copying, and transcription
any of the records identified in Sec. 13.25.
(e) Actions on complaints--(1) Reporting time frame. The
contracting agency shall forward all information listed in paragraph
(e)(2) of this section to the Office of Government Contracts
Enforcement, Wage and Hour Division, U.S. Department of Labor, 200
Constitution Avenue NW., Washington, DC 20210 within 14 calendar days
of receipt of a complaint alleging contractor noncompliance with
Executive Order 13706 or this part or within 14 calendar days of being
contacted by the Wage and Hour Division regarding any such complaint.
(2) Report contents. The contracting agency shall forward to the
Office of Government Contracts Enforcement,
[[Page 67718]]
Wage and Hour Division, U.S. Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210 any:
(i) Complaint of contractor noncompliance with Executive Order
13706 or this part;
(ii) Available statements by the worker, contractor, or any other
person regarding the alleged violation;
(iii) Evidence that the Executive Order paid sick leave contract
clause was included in the contract;
(iv) Information concerning known settlement negotiations between
the parties, if applicable; and
(v) Any other relevant facts known to the contracting agency or
other information requested by the Wage and Hour Division.
Sec. 13.12 Department of Labor requirements.
(a) Notice--(1) Wage Determinations OnLine Web site. The
Administrator will publish and maintain on Wage Determinations OnLine
(WDOL), http://www.wdol.gov, or any successor site, a notice that
Executive Order 13706 creates a requirement to allow employees
performing work on or in connection with contracts covered by Executive
Order 13706 and this part to accrue and use paid sick leave, as well as
an indication of where to find more complete information about that
requirement.
(2) Wage determinations. The Administrator will publish on all wage
determinations issued under the Davis-Bacon Act and the Service
Contract Act a notice that Executive Order 13706 creates a requirement
to allow employees performing work on or in connection with contracts
covered by Executive Order 13706 and this part to accrue and use paid
sick leave, as well as an indication of where to find more complete
information about that requirement.
(b) Notification to a contractor of the withholding of funds. If
the Administrator requests that a contracting agency withhold funds
from a contractor pursuant to Sec. 13.11(c), or suspend payment,
advance, or guarantee of funds pursuant to Sec. 13.11(d), the
Administrator and/or contracting agency shall notify the affected prime
contractor of the Administrator's request to the contracting agency.
Subpart C--Contractor Requirements
Sec. 13.21 Contract clause.
(a) The contractor, as a condition of payment, shall abide by the
terms of the applicable Executive Order paid sick leave contract clause
referred to in Sec. 13.11(a).
(b) The contractor shall include in any covered subcontracts the
applicable Executive Order paid sick leave contract clause referred to
in Sec. 13.11(a) and shall require, as a condition of payment, that
the subcontractor include the contract clause in any lower-tier
subcontracts. The prime contractor and any upper-tier contractor shall
be responsible for the compliance by any subcontractor or lower-tier
subcontractor with the requirements of Executive Order 13706 and this
part, whether or not the contract clause was included in the
subcontract.
Sec. 13.22 Paid sick leave.
The contractor shall allow all employees performing work on or in
connection with a covered contract to accrue and use paid sick leave as
required by Executive Order 13706 and this part.
Sec. 13.23 Deductions.
The contractor may make deductions from the pay and benefits of an
employee who is using paid sick leave only if such deduction qualifies
as a:
(a) Deduction required by Federal, State, or local law, such as
Federal or State withholding of income taxes;
(b) Deduction for payments made to third parties pursuant to court
order;
(c) Deduction directed by a voluntary assignment of the employee or
his or her authorized representative;
(d) Deduction for the reasonable cost or fair value, as determined
by the Administrator, of furnishing such employee with ``board,
lodging, or other facilities,'' as defined in 29 U.S.C. 203(m) and 29
CFR part 531;
(e) Deduction, to the extent permitted by law, for the purpose of
recouping pay and benefits provided for paid sick leave as to which the
contractor retroactively denied the employee's request pursuant to
Sec. 13.5(e)(3)(iii) or because the contractor approved the use of the
paid sick leave based on a fraudulent request.
Sec. 13.24 Anti-kickback.
All paid sick leave used by employees performing on or in
connection with covered contracts must be paid free and clear and
without subsequent deduction (except as set forth in Sec. 13.23),
rebate, or kickback on any account. Kickbacks directly or indirectly to
the contractor or to another person for the contractor's benefit for
the whole or part of the paid sick leave are prohibited.
Sec. 13.25 Records to be kept by contractors.
(a) The contractor and each subcontractor performing work subject
to Executive Order 13706 and this part shall make and maintain during
the course of the covered contract, and preserve for no less than 3
years thereafter, records containing the information specified in
paragraphs (a)(1) through (15) of this section for each employee and
shall make them available for inspection, copying, and transcription by
authorized representatives of the Wage and Hour Division of the U.S.
Department of Labor:
(1) Name, address, and Social Security number of each employee;
(2) The employee's occupation(s) or classification(s);
(3) The rate or rates of wages paid (including all pay and benefits
provided);
(4) The number of daily and weekly hours worked;
(5) Any deductions made;
(6) The total wages paid (including all pay and benefits provided)
each pay period;
(7) A copy of notifications to employees of the amount of paid sick
leave the employees have accrued as required under Sec. 13.5(a)(2);
(8) A copy of employees' requests to use paid sick leave, if in
writing, or, if not in writing, any other records reflecting such
employee requests;
(9) Dates and amounts of paid sick leave used by employees (unless
a contractor's paid time off policy satisfies the requirements of
Executive Order 13706 and this part as described in Sec. 13.5(f)(5),
leave must be designated in records as paid sick leave pursuant to
Executive Order 13706);
(10) A copy of any written responses to employees' requests to use
paid sick leave, including explanations for any denials of such
requests, as required under Sec. 13.5(d)(3);
(11) Any records relating to the certification and documentation a
contractor may require an employee to provide under Sec. 13.5(e),
including copies of any certification or documentation provided by an
employee;
(12) Any other records showing any tracking of or calculations
related to an employee's accrual and/or use of paid sick leave;
(13) The relevant covered contract;
(14) The regular pay and benefits provided to an employee for each
use of paid sick leave; and
(15) Any financial payment made for unused paid sick leave upon a
separation from employment intended, pursuant to Sec. 13.5(b)(5), to
relieve a contractor from the obligation to reinstate such paid sick
leave as otherwise required by Sec. 13.5(b)(4).
(b) Segregation of time. (1) If a contractor wishes to distinguish
[[Page 67719]]
between an employee's covered and non-covered work (such as time spent
performing work on or in connection with a covered contract versus time
spent performing work on or in connection with non-covered contracts or
time spent performing work on or in connection with a covered contract
in the United States versus time spent performing work outside the
United States, or to establish that time spent performing solely in
connection with covered contracts constituted less than 20 percent of
an employee's hours worked during a particular workweek), the
contractor must keep records or other proof reflecting such
distinctions. Only if the contractor adequately segregates the
employee's time will time spent on non-covered work be excluded from
hours worked counted toward the accrual of paid sick leave. Similarly,
only if that contractor adequately segregates the employee's time may a
contractor properly deny an employee's request to take leave under
Sec. 13.5(d) on the ground that the employee was scheduled to perform
non-covered work during the time she asked to use paid sick leave.
(2) If a contractor estimates covered hours worked by an employee
who performs work in connection with covered contracts pursuant to
Sec. 13.5(a)(1)(i) or (iii), the contractor must keep records or other
proof of the verifiable information on which such estimates are
reasonably based. Only if the contractor relies on an estimate that is
reasonable and based on verifiable information will an employee's time
spent in connection with non-covered contracts be excluded from hours
worked counted toward the accrual of paid sick leave. If a contractor
estimates the amount of time an employee spends performing in
connection with covered contracts, the contractor must permit the
employee to use her paid sick leave during any work time for the
contractor.
(c) If a contractor is not obligated by the Service Contract Act,
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an
employee's hours worked, such as because the employee is employed in a
bona fide executive, administrative, or professional capacity as those
terms are defined in 29 CFR part 541, and the contractor chooses to use
the assumption permitted by Sec. 13.5(a)(1)(iii), the contractor is
excused from the requirement in paragraph (a)(4) of this section to
keep records of the employee's number of daily and weekly hours worked.
(d)(1) Records relating to medical histories or domestic violence,
sexual assault, or stalking, created by or provided to a contractor for
purposes of Executive Order 13706, whether of an employee or an
employee's child, parent, spouse, domestic partner, or other individual
related by blood or affinity whose close association with the employee
is the equivalent of a family relationship, shall be maintained as
confidential records in separate files/records from the usual personnel
files.
(2) If the confidentiality requirements of the Genetic Information
Nondiscrimination Act of 2008 (GINA), section 503 of the Rehabilitation
Act of 1973, and/or the Americans with Disabilities Act (ADA) apply to
medical information contained in records or documents that the
contractor created or received in connection with compliance with the
recordkeeping or other requirements of this part, the records and
documents must also be maintained in compliance with the
confidentiality requirements of the GINA, section 503 of the
Rehabilitation Act of 1973, and/or ADA as described in Sec. 1635.9 of
this title, 41 CFR 60-741.23(d), and Sec. 1630.14(c)(1) of this title,
respectively.
(3) The contractor shall not disclose any documentation used to
verify the need to use 3 or more consecutive days of paid sick leave
for the purposes listed in Sec. 13.5(c)(1)(iv) (as described in Sec.
13.5(d)(2)) and shall maintain confidentiality about any domestic
abuse, sexual assault, or stalking, unless the employee consents or
when disclosure is required by law.
(e) The contractor shall permit authorized representatives of the
Wage and Hour Division to conduct interviews with employees at the
worksite during normal working hours.
(f) Nothing in this part limits or otherwise modifies the
contractor's recordkeeping obligations, if any, under the Davis-Bacon
Act, the Service Contract Act, the Fair Labor Standards Act, the Family
and Medical Leave Act, Executive Order 13658, their implementing
regulations, or other applicable law.
Sec. 13.26 Notice.
(a) The contractor must notify all employees performing work on or
in connection with a covered contract of the paid sick leave
requirements of Executive Order 13706 and this part by posting a notice
provided by the Department of Labor in a prominent and accessible place
at the worksite so it may be readily seen by employees.
(b) Contractors that customarily post notices to employees
electronically may post the notice electronically, provided such
electronic posting is displayed prominently on any Web site that is
maintained by the contractor, whether external or internal, and
customarily used for notices to employees about terms and conditions of
employment.
Sec. 13.27 Timing of pay.
The contractor shall compensate an employee for time during which
the employee used paid sick leave no later than one pay period
following the end of the regular pay period in which the paid sick
leave was used.
Subpart D--Enforcement
Sec. 13.41 Complaints.
(a) Any employee, contractor, labor organization, trade
organization, contracting agency, or other person or entity that
believes a violation of the Executive Order or this part has occurred
may file a complaint with any office of the Wage and Hour Division. No
particular form of complaint is required. A complaint may be filed
orally or in writing. If the complainant is unable to file the
complaint in English, the Wage and Hour Division will accept the
complaint in any language.
(b) It is the policy of the Department of Labor to protect the
identity of its confidential sources and to prevent an unwarranted
invasion of personal privacy. Accordingly, the identity of any
individual who makes a written or oral statement as a complaint or in
the course of an investigation, as well as portions of the statement
which would reveal the individual's identity, shall not be disclosed in
any manner to anyone other than Federal officials without the prior
consent of the individual. Disclosure of such statements shall be
governed by the provisions of the Freedom of Information Act, 5 U.S.C.
552, 29 CFR part 70, and the Privacy Act of 1974, 5 U.S.C. 552a.
Sec. 13.42 Wage and Hour Division conciliation.
After receipt of a complaint, the Administrator may seek to resolve
the matter through conciliation.
Sec. 13.43 Wage and Hour Division investigation.
The Administrator may investigate possible violations of the
Executive Order or this part either as the result of a complaint or at
any time on his or her own initiative. As part of the investigation,
the Administrator may conduct interviews with the relevant contractor,
as well as the contractor's employees at the worksite during normal
work hours; inspect the relevant contractor's records (including
contract documents and payrolls, if applicable); make copies and
transcriptions of such records; and require the production of
[[Page 67720]]
any documentary or other evidence the Administrator deems necessary to
determine whether a violation, including conduct warranting imposition
of debarment, has occurred. Federal agencies and contractors shall
cooperate with any authorized representative of the Department of Labor
in the inspection of records, in interviews with employees, and in all
aspects of investigations.
Sec. 13.44 Remedies and sanctions.
(a) Interference. When the Administrator determines that a
contractor has interfered with an employee's accrual or use of paid
sick leave in violation of Sec. 13.6(a), the Administrator will notify
the contractor and the relevant contracting agency of the interference
and request that the contractor remedy the violation. If the contractor
does not remedy the violation, the Administrator shall direct the
contractor to provide any appropriate relief to the affected
employee(s) in the investigative findings letter issued pursuant to
Sec. 13.51. Such relief may include any pay and/or benefits denied or
lost by reason of the violation; other actual monetary losses sustained
as a direct result of the violation; or appropriate equitable or other
relief. Payment of liquidated damages in an amount equaling any
monetary relief may also be directed unless such amount is reduced by
the Administrator because the violation was in good faith and the
contractor had reasonable grounds for believing it had not violated the
Order or this part. The Administrator may additionally direct that
payments due on the contract or any other contract between the
contractor and the Federal Government be withheld as may be necessary
to provide any appropriate monetary relief. Upon the final order of the
Secretary that monetary relief is due, the Administrator may direct the
relevant contracting agency to transfer the withheld funds to the
Department of Labor for disbursement.
(b) Discrimination. When the Administrator determines that a
contractor has discriminated against an employee in violation of Sec.
13.6(b), the Administrator will notify the contractor and the relevant
contracting agency of the discrimination and request that the
contractor remedy the violation. If the contractor does not remedy the
violation, the Administrator shall direct the contractor to provide
appropriate relief to the affected employee(s) in the investigative
findings letter issued pursuant to Sec. 13.51. Such relief may
include, but is not limited to, employment, reinstatement, promotion,
restoration of leave, or lost pay and/or benefits. Payment of
liquidated damages in an amount equaling any monetary relief may also
be directed unless such amount is reduced by the Administrator because
the violation was in good faith and the contractor had reasonable
grounds for believing the contractor had not violated the Order or this
part. The Administrator may additionally direct that payments due on
the contract or any other contract between the contractor and the
Federal Government be withheld as may be necessary to provide any
appropriate monetary relief. Upon the final order of the Secretary that
monetary relief is due, the Administrator may direct the relevant
contracting agency to transfer the withheld funds to the Department of
Labor for disbursement.
(c) Recordkeeping. When a contractor fails to comply with the
requirements of Sec. 13.25 in violation of Sec. 13.6(c), the
Administrator will request that the contractor remedy the violation. If
the contractor fails to produce required records upon request, the
contracting officer, upon direction of an authorized representative of
the Department of Labor, or under its own action, shall take such
action as may be necessary to cause suspension of any further payment,
advance, or guarantee of funds on the contract until such time as the
violations are discontinued.
(d) Debarment. Whenever a contractor is found by the Secretary to
have disregarded its obligations under the Executive Order or this
part, such contractor and its responsible officers, and any firm,
corporation, partnership, or association in which the contractor or
responsible officers have an interest, shall be ineligible to be
awarded any contract or subcontract subject to the Executive Order for
a period of up to 3 years from the date of publication of the name of
the contractor or responsible officer on the excluded parties list
currently maintained on the System for Award Management Web site,
http://www.SAM.gov. Neither an order of debarment of any contractor or
its responsible officers from further Government contracts nor the
inclusion of a contractor or its responsible officers on a published
list of noncomplying contractors under this section shall be carried
out without affording the contractor or responsible officers an
opportunity for a hearing before an Administrative Law Judge.
(e) Civil actions to recover greater underpayments than those
withheld. If the payments withheld under Sec. 13.11(c) are
insufficient to reimburse all monetary relief due, or if there are no
payments to withhold, the Department of Labor, following a final order
of the Secretary, may bring an action against the contractor in any
court of competent jurisdiction to recover the remaining amount. The
Department of Labor shall, to the extent possible, pay any sums it
recovers in this manner directly to the employees who suffered the
violation(s) of Sec. 13.6(a) or (b). Any sum not paid to an employee
because of inability to do so within 3 years shall be transferred into
the Treasury of the United States as miscellaneous receipts.
(f) Retroactive inclusion of contract clause. If a contracting
agency fails to include the applicable contract clause in a contract to
which the Executive Order applies, the contracting agency, on its own
initiative or within 15 calendar days of notification by an authorized
representative of the Department of Labor, shall incorporate the
contract clause in the contract retroactive to commencement of
performance under the contract through the exercise of any and all
authority that may be needed (including, where necessary, its authority
to negotiate or amend, its authority to pay any necessary additional
costs, and its authority under any contract provision authorizing
changes, cancellation, and termination).
Subpart E--Administrative Proceedings
Sec. 13.51 Disputes concerning contractor compliance.
(a) This section sets forth the procedures for resolution of
disputes of fact or law concerning a contractor's compliance with this
part. The procedures in this section may be initiated upon the
Administrator's own motion or upon request of the contractor.
(b)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that relevant facts are at issue, the
Administrator will notify the affected contractor(s) and the prime
contractor (if different) of the investigative findings by certified
mail to the last known address.
(2) A contractor desiring a hearing concerning the Administrator's
investigative findings letter shall request such a hearing by letter
postmarked within 30 calendar days of the date of the Administrator's
letter. The request shall set forth those findings that are in dispute
with respect to the violations and/or debarment, as appropriate,
explain how the findings are in dispute including by making reference
to any affirmative defenses.
(3) Upon receipt of a timely request for a hearing, the
Administrator shall refer the case to the Chief
[[Page 67721]]
Administrative Law Judge by Order of Reference, to which shall be
attached a copy of the investigative findings letter from the
Administrator and response thereto, for designation to an
Administrative Law Judge to conduct such hearings as may be necessary
to resolve the disputed matters. The hearing shall be conducted in
accordance with the procedures set forth in 29 CFR part 6.
(c)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that there are no relevant facts at issue,
and where there is not at that time reasonable cause to institute
debarment proceedings under Sec. 13.52, the Administrator shall notify
the contractor(s) of the investigative findings by certified mail to
the last known address, and shall issue a ruling in the investigative
findings letter on any issues of law known to be in dispute.
(2)(i) If the contractor disagrees with the factual findings of the
Administrator or believes that there are relevant facts in dispute, the
contractor shall so advise the Administrator by letter postmarked
within 30 calendar days of the date of the Administrator's letter. In
the response, the contractor shall explain in detail the facts alleged
to be in dispute and attach any supporting documentation.
(ii) Upon receipt of a timely response under paragraph (c)(2)(i) of
this section alleging the existence of a factual dispute, the
Administrator shall examine the information submitted. If the
Administrator determines that there is a relevant issue of fact, the
Administrator shall refer the case to the Chief Administrative Law
Judge in accordance with paragraph (b)(3) of this section. If the
Administrator determines that there is no relevant issue of fact, the
Administrator shall so rule and advise the contractor accordingly.
(3) If the contractor desires review of the ruling issued by the
Administrator under paragraph (c)(1) or the final sentence of
(c)(2)(ii) of this section, the contractor shall file a petition for
review thereof with the Administrative Review Board postmarked within
30 calendar days of the date of the ruling, with a copy thereof to the
Administrator. The petition for review shall be filed in accordance
with the procedures set forth in 29 CFR part 7.
(d) If a timely response to the Administrator's investigative
findings letter is not made or a timely petition for review is not
filed, the Administrator's investigative findings letter shall become
the final order of the Secretary. If a timely response or petition for
review is filed, the Administrator's letter shall be inoperative unless
and until the decision is upheld by an Administrative Law Judge or the
Administrative Review Board or otherwise becomes a final order of the
Secretary.
Sec. 13.52 Debarment proceedings.
(a) Whenever any contractor is found by the Secretary of Labor to
have disregarded its obligations to employees or subcontractors under
Executive Order 13706 or this part, such contractor and its responsible
officers, and any firm, corporation, partnership, or association in
which such contractor or responsible officers have an interest, shall
be ineligible for a period up to 3 years to receive any contracts or
subcontracts subject to Executive Order 13706 from the date of
publication of the name or names of the contractor or persons on the
excluded parties list currently maintained on the System for Award
Management Web site, http://www.SAM.gov.
(b)(1) Whenever the Administrator finds reasonable cause to believe
that a contractor has committed a violation of Executive Order 13706 or
this part which constitutes a disregard of its obligations to employees
or subcontractors, the Administrator shall notify by certified mail to
the last known address or by personal delivery, the contractor and its
responsible officers (and any firms, corporations, partnerships, or
associations in which the contractor or responsible officers are known
to have an interest), of the finding. The Administrator shall afford
such contractor and any other parties notified an opportunity for a
hearing as to whether debarment action should be taken under Executive
Order 13706 or this part. The Administrator shall furnish to those
notified a summary of the investigative findings. If the contractor or
any other parties notified wish to request a hearing as to whether
debarment action should be taken, such a request shall be made by
letter to the Administrator postmarked within 30 calendar days of the
date of the investigative findings letter from the Administrator, and
shall set forth any findings which are in dispute and the reasons
therefor, including any affirmative defenses to be raised. Upon receipt
of such timely request for a hearing, the Administrator shall refer the
case to the Chief Administrative Law Judge by Order of Reference, to
which shall be attached a copy of the investigative findings letter
from the Administrator and the response thereto, for designation of an
Administrative Law Judge to conduct such hearings as may be necessary
to determine the matters in dispute.
(2) Hearings under this section shall be conducted in accordance
with the procedures set forth in 29 CFR part 6. If no hearing is
requested within 30 calendar days of the letter from the Administrator,
the Administrator's findings shall become the final order of the
Secretary.
Sec. 13.53 Referral to Chief Administrative Law Judge; amendment of
pleadings.
(a) Upon receipt of a timely request for a hearing under Sec.
13.51 (where the Administrator has determined that relevant facts are
in dispute) or Sec. 13.52 (debarment), the Administrator shall refer
the case to the Chief Administrative Law Judge by Order of Reference,
to which shall be attached a copy of the investigative findings letter
from the Administrator and response thereto, for designation of an
Administrative Law Judge to conduct such hearings as may be necessary
to decide the disputed matters. A copy of the Order of Reference and
attachments thereto shall be served upon the respondent. The
investigative findings letter from the Administrator and response
thereto shall be given the effect of a complaint and answer,
respectively, for purposes of the administrative proceedings.
(b) At any time prior to the closing of the hearing record, the
complaint (investigative findings letter) or answer (response) may be
amended with the permission of the Administrative Law Judge and upon
such terms as the Administrative Law Judge may approve. For proceedings
pursuant to Sec. 13.51, such an amendment may include a statement that
debarment action is warranted under Sec. 13.52. Such amendments shall
be allowed when justice and the presentation of the merits are served
thereby, provided there is no prejudice to the objecting party's
presentation on the merits. When issues not raised by the pleadings are
reasonably within the scope of the original complaint and are tried by
express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings, and such
amendments may be made as necessary to make them conform to the
evidence. The presiding Administrative Law Judge may, upon reasonable
notice and upon such terms as are just, permit supplemental pleadings
setting forth transactions, occurrences, or events that have happened
since the date of the pleadings and that are relevant to any of the
issues involved. A continuance in the hearing may be granted or the
record
[[Page 67722]]
left open to enable the new allegations to be addressed.
Sec. 13.54 Consent findings and order.
(a) At any time prior to the receipt of evidence or, at the
Administrative Law Judge's discretion prior to the issuance of the
Administrative Law Judge's decision, the parties may enter into consent
findings and an order disposing of the proceeding in whole or in part.
(b) Any agreement containing consent findings and an order
disposing of a proceeding in whole or in part shall also provide:
(1) That the order shall have the same force and effect as an order
made after full hearing;
(2) That the entire record on which any order may be based shall
consist solely of the Administrator's findings letter and the
agreement;
(3) A waiver of any further procedural steps before the
Administrative Law Judge and the Administrative Review Board regarding
those matters which are the subject of the agreement; and
(4) A waiver of any right to challenge or contest the validity of
the findings and order entered into in accordance with the agreement.
(c) Within 30 calendar days after receipt of an agreement
containing consent findings and an order disposing of the disputed
matter in whole, the Administrative Law Judge shall, if satisfied with
its form and substance, accept such agreement by issuing a decision
based upon the agreed findings and order. If such agreement disposes of
only a part of the disputed matter, a hearing shall be conducted on the
matters remaining in dispute.
Sec. 13.55 Administrative Law Judge proceedings.
(a) Jurisdiction. The Office of Administrative Law Judges has
jurisdiction to hear and decide appeals concerning questions of law and
fact from the Administrator's investigative findings letters issued
under Sec. Sec. 13.51 and 13.52.
(b) Proposed findings of fact, conclusions, and order. Within 20
calendar days of filing of the transcript of the testimony or such
additional time as the Administrative Law Judge may allow, each party
may file with the Administrative Law Judge proposed findings of fact,
conclusions of law, and a proposed order, together with a supporting
brief expressing the reasons for such proposals. Each party shall serve
such proposals and brief on all other parties.
(c) Decision. (1) Within a reasonable period of time after the time
allowed for filing of proposed findings of fact, conclusions of law,
and order, or within 30 calendar days of receipt of an agreement
containing consent findings and order disposing of the disputed matter
in whole, the Administrative Law Judge shall issue a decision. The
decision shall contain appropriate findings, conclusions, and an order,
and be served upon all parties to the proceeding.
(2) If the respondent is found to have violated Executive Order
13706 or this part, and if the Administrator requested debarment, the
Administrative Law Judge shall issue an order as to whether the
respondent is to be subject to the excluded parties list, including
findings that the contractor disregarded its obligations to employees
or subcontractors under the Executive Order or this part.
(d) Limit on scope of review. The Equal Access to Justice Act, as
amended, does not apply to proceedings under this part. Accordingly,
Administrative Law Judges shall have no authority to award attorney's
fees and/or other litigation expenses pursuant to the provisions of the
Equal Access to Justice Act for any proceeding under this part.
(e) Orders. If the Administrative Law Judge concludes a violation
occurred, the final order shall mandate action to remedy the violation,
including any monetary or equitable relief described in Sec. 13.44.
Where the Administrator has sought imposition of debarment, the
Administrative Law Judge shall determine whether an order imposing
debarment is appropriate.
(f) Finality. The Administrative Law Judge's decision shall become
the final order of the Secretary, unless a timely petition for review
is filed with the Administrative Review Board.
Sec. 13.56 Petition for review.
(a) Filing. Within 30 calendar days after the date of the decision
of the Administrative Law Judge (or such additional time as is granted
by the Administrative Review Board), any party aggrieved thereby who
desires review thereof shall file a petition for review of the decision
with supporting reasons. Such party shall transmit the petition in
writing to the Administrative Review Board with a copy thereof to the
Chief Administrative Law Judge. The petition shall refer to the
specific findings of fact, conclusions of law, or order at issue. A
petition concerning the decision on debarment shall also state the
disregard of obligations to employees and/or subcontractors, or lack
thereof, as appropriate. A party must serve the petition for review,
and all briefs, on all parties and the Chief Administrative Law Judge.
It must also timely serve copies of the petition and all briefs on the
Administrator, Wage and Hour Division, and on the Associate Solicitor,
Division of Fair Labor Standards, Office of the Solicitor, U.S.
Department of Labor, Washington, DC 20210.
(b) Effect of filing. If a party files a timely petition for
review, the Administrative Law Judge's decision shall be inoperative
unless and until the Administrative Review Board issues an order
affirming the decision, or the decision otherwise becomes a final order
of the Secretary. If a petition for review concerns only the imposition
of debarment, however, the remainder of the decision shall be effective
immediately. No judicial review shall be available unless a timely
petition for review to the Administrative Review Board is first filed.
Sec. 13.57 Administrative Review Board proceedings.
(a) Authority--(1) General. The Administrative Review Board has
jurisdiction to hear and decide in its discretion appeals concerning
questions of law and fact from investigative findings letters of the
Administrator issued under Sec. 13.51(c)(1) or the final sentence of
Sec. 13.51(c)(2)(ii), Administrator's rulings issued under Sec.
13.58, and decisions of Administrative Law Judges issued under Sec.
13.55. In considering the matters within the scope of its jurisdiction,
the Administrative Review Board shall act as the authorized
representative of the Secretary and shall act fully and finally on
behalf of the Secretary concerning such matters.
(2) Limit on scope of review. (i) The Administrative Review Board
shall not have jurisdiction to pass on the validity of any provision of
this part. The Administrative Review Board is an appellate body and
shall decide cases properly before it on the basis of substantial
evidence contained in the entire record before it. The Administrative
Review Board shall not receive new evidence into the record.
(ii) The Equal Access to Justice Act, as amended, does not apply to
proceedings under this part. Accordingly, the Administrative Review
Board shall have no authority to award attorney's fees and/or other
litigation expenses pursuant to the provisions of the Equal Access to
Justice Act for any proceeding under this part.
(b) Decisions. The Administrative Review Board's final decision
shall be issued within a reasonable period of time following receipt of
the petition for review and shall be served upon all
[[Page 67723]]
parties by mail to the last known address and on the Chief
Administrative Law Judge (in cases involving an appeal from an
Administrative Law Judge's decision).
(c) Orders. If the Administrative Review Board concludes a
violation occurred, the final order shall mandate action to remedy the
violation, including, but not limited to, any monetary or equitable
relief described in Sec. 13.44. Where the Administrator has sought
imposition of debarment, the Administrative Review Board shall
determine whether an order imposing debarment is appropriate.
(d) Finality. The decision of the Administrative Review Board shall
become the final order of the Secretary.
Sec. 13.58 Administrator ruling.
(a) Questions regarding the application and interpretation of the
rules contained in this part may be referred to the Administrator, who
shall issue an appropriate ruling. Requests for such rulings should be
addressed to the Administrator, Wage and Hour Division, U.S. Department
of Labor, Washington, DC 20210.
(b) Any interested party may appeal to the Administrative Review
Board for review of a final ruling of the Administrator issued under
paragraph (a) of this section. The petition for review shall be filed
with the Administrative Review Board within 30 calendar days of the
date of the ruling.
Appendix A to Part 13--Contract Clause
The following clause shall be included by the contracting agency
in every contract, contract-like instrument, and solicitation to
which Executive Order 13706 applies, except for procurement
contracts subject to the Federal Acquisition Regulation (FAR):
(a) Executive Order 13706. This contract is subject to Executive
Order 13706, the regulations issued by the Secretary of Labor in 29
CFR part 13 pursuant to the Executive Order, and the following
provisions.
(b) Paid Sick Leave. (1) The contractor shall permit each
employee (as defined in 29 CFR 13.2) engaged in the performance of
this contract by the prime contractor or any subcontractor,
regardless of any contractual relationship that may be alleged to
exist between the contractor and employee, to earn not less than 1
hour of paid sick leave for every 30 hours worked. The contractor
shall additionally allow accrual and use of paid sick leave as
required by Executive Order 13706 and 29 CFR part 13. The contractor
shall in particular comply with the accrual, use, and other
requirements set forth in 29 CFR 13.5 and 13.6, which are
incorporated by reference in this contract.
(2) The contractor shall provide paid sick leave to all
employees when due free and clear and without subsequent deduction
(except as otherwise provided by 29 CFR 13.24), rebate, or kickback
on any account. The contractor shall provide pay and benefits for
paid sick leave used no later than one pay period following the end
of the regular pay period in which the paid sick leave was taken.
(3) The prime contractor and any upper-tier subcontractor shall
be responsible for the compliance by any subcontractor or lower-tier
subcontractor with the requirements of Executive Order 13706, 29 CFR
part 13, and this clause.
(c) Withholding. The contracting officer shall, upon its own
action or upon written request of an authorized representative of
the Department of Labor, withhold or cause to be withheld from the
prime contractor under this or any other Federal contract with the
same prime contractor, so much of the accrued payments or advances
as may be considered necessary to pay employees the full amount owed
to compensate for any violation of the requirements of Executive
Order 13706, 29 CFR part 13, or this clause, including any pay and/
or benefits denied or lost by reason of the violation; other actual
monetary losses sustained as a direct result of the violation, and
liquidated damages.
(d) Contract Suspension/Contract Termination/Contractor
Debarment. In the event of a failure to comply with Executive Order
13706, 29 CFR part 13, or this clause, the contracting agency may on
its own action or after authorization or by direction of the
Department of Labor and written notification to the contractor, take
action to cause suspension of any further payment, advance, or
guarantee of funds until such violations have ceased. Additionally,
any failure to comply with the requirements of this clause may be
grounds for termination of the right to proceed with the contract
work. In such event, the Government may enter into other contracts
or arrangements for completion of the work, charging the contractor
in default with any additional cost. A breach of the contract clause
may be grounds for debarment as a contractor and subcontractor as
provided in 29 CFR 13.52.
(e) The paid sick leave required by Executive Order 13706, 29
CFR part 13, and this clause is in addition to a contractor's
obligations under the Service Contract Act and Davis-Bacon Act, and
a contractor may not receive credit toward its prevailing wage or
fringe benefit obligations under those Acts for any paid sick leave
provided in satisfaction of the requirements of Executive Order
13706 and 29 CFR part 13.
(f) Nothing in Executive Order 13706 or 29 CFR part 13 shall
excuse noncompliance with or supersede any applicable Federal or
State law, any applicable law or municipal ordinance, or a
collective bargaining agreement requiring greater paid sick leave or
leave rights than those established under Executive Order 13706 and
29 CFR part 13.
(g) Recordkeeping. (1) Any contractor performing work subject to
Executive Order 13706 and 29 CFR part 13 must make and maintain, for
no less than three (3) years from the completion of the work on the
contract, records containing the information specified in paragraphs
(i) through (xv) of this section for each employee and shall make
them available for inspection, copying, and transcription by
authorized representatives of the Wage and Hour Division of the U.S.
Department of Labor:
(i) Name, address, and Social Security number of each employee;
(ii) The employee's occupation(s) or classification(s);
(iii) The rate or rates of wages paid (including all pay and
benefits provided);
(iv) The number of daily and weekly hours worked;
(v) Any deductions made;
(vi) The total wages paid (including all pay and benefits
provided) each pay period;
(vii) A copy of notifications to employees of the amount of paid
sick leave the employee has accrued, as required under 29 CFR
13.5(a)(2);
(viii) A copy of employees' requests to use paid sick leave, if
in writing, or, if not in writing, any other records reflecting such
employee requests;
(ix) Dates and amounts of paid sick leave taken by employees
(unless a contractor's paid time off policy satisfies the
requirements of Executive Order 13706 and 29 CFR part 13 as
described in Sec. 13.5(f)(5), leave must be designated in records
as paid sick leave pursuant to Executive Order 13706);
(x) A copy of any written responses to employees' requests to
use paid sick leave, including explanations for any denials of such
requests, as required under 29 CFR 13.5(d)(3);
(xi) Any records reflecting the certification and documentation
a contractor may require an employee to provide under 29 CFR
13.5(e), including copies of any certification or documentation
provided by an employee;
(xii) Any other records showing any tracking of or calculations
related to an employee's accrual or use of paid sick leave;
(xiii) The relevant covered contract;
(xiv) The regular pay and benefits provided to an employee for
each use of paid sick leave; and
(xv) Any financial payment made for unused paid sick leave upon
a separation from employment intended, pursuant to 29 CFR
13.5(b)(5), to relieve a contractor from the obligation to reinstate
such paid sick leave as otherwise required by 29 CFR 13.5(b)(4).
(2)(i) If a contractor wishes to distinguish between an
employee's covered and non-covered work, the contractor must keep
records or other proof reflecting such distinctions. Only if the
contractor adequately segregates the employee's time will time spent
on non-covered work be excluded from hours worked counted toward the
accrual of paid sick leave. Similarly, only if that contractor
adequately segregates the employee's time may a contractor properly
refuse an employee's request to use paid sick leave on the ground
that the employee was scheduled to perform non-covered work during
the time she asked to use paid sick leave.
(ii) If a contractor estimates covered hours worked by an
employee who performs work in connection with covered contracts
pursuant to 29 CFR 13.5(a)(i) or (iii), the contractor must keep
records or other proof of the verifiable information on which such
[[Page 67724]]
estimates are reasonably based. Only if the contractor relies on an
estimate that is reasonable and based on verifiable information will
an employee's time spent in connection with non-covered work be
excluded from hours worked counted toward the accrual of paid sick
leave. If a contractor estimates the amount of time an employee
spends performing in connection with covered contracts, the
contractor must permit the employee to use her paid sick leave
during any work time for the contractor.
(3) In the event a contractor is not obligated by the Service
Contract Act, the Davis-Bacon Act, or the Fair Labor Standards Act
to keep records of an employee's hours worked, such as because the
employee is exempt from the FLSA's minimum wage and overtime
requirements, and the contractor chooses to use the assumption
permitted by 29 CFR 13.5(a)(1)(iii), the contractor is excused from
the requirement in paragraph (1)(d) of this section to keep records
of the employee's number of daily and weekly hours worked.
(4)(i) Records relating to medical histories or domestic
violence, sexual assault, or stalking, created for purposes of
Executive Order 13706, whether of an employee or an employee's
child, parent, spouse, domestic partner, or other individual related
by blood or affinity whose close association with the employee is
the equivalent of a family relationship, shall be maintained as
confidential records in separate files/records from the usual
personnel files.
(ii) If the confidentiality requirements of the Genetic
Information Nondiscrimination Act of 2008 (GINA), section 503 of the
Rehabilitation Act of 1973, and/or the Americans with Disabilities
Act (ADA) apply to records or documents created to comply with the
recordkeeping requirements in this contract clause, the records and
documents must also be maintained in compliance with the
confidentiality requirements of the GINA, section 503 of the
Rehabilitation Act of 1973, and/or ADA as described in 29 CFR
1635.9, 41 CFR 60-741.23(d), and 29 CFR 1630.14(c)(1), respectively.
(iii) The contractor shall not disclose any documentation used
to verify the need to use 3 or more consecutive days of paid sick
leave for the purposes listed in 29 CFR 13.5(c)(1)(iv) (as described
in 29 CFR 13.5(e)(1)(ii)) and shall maintain confidentiality about
any domestic abuse, sexual assault, or stalking, unless the employee
consents or when disclosure is required by law.
(5) The contractor shall permit authorized representatives of
the Wage and Hour Division to conduct interviews with employees at
the worksite during normal working hours.
(6) Nothing in this contract clause limits or otherwise modifies
the contractor's recordkeeping obligations, if any, under the Davis-
Bacon Act, the Service Contract Act, the Fair Labor Standards Act,
the Family and Medical Leave Act, Executive Order 13658, their
respective implementing regulations, or any other applicable law.
(h) The contractor (as defined in 29 CFR 13.2) shall insert this
clause in all of its covered subcontracts and shall require its
subcontractors to include this clause in any covered lower-tier
subcontracts.
(i) Certification of Eligibility. (1) By entering into this
contract, the contractor (and officials thereof) certifies that
neither it (nor he or she) nor any person or firm who has an
interest in the contractor's firm is a person or firm ineligible to
be awarded Government contracts by virtue of the sanctions imposed
pursuant to section 5 of the Service Contract Act, section 3(a) of
the Davis-Bacon Act, or 29 CFR 5.12(a)(1).
(2) No part of this contract shall be subcontracted to any
person or firm whose name appears on the list of persons or firms
ineligible to receive Federal contracts currently maintained on the
System for Award Management Web site, http://www.SAM.gov.
(3) The penalty for making false statements is prescribed in the
U.S. Criminal Code, 18 U.S.C. 1001.
(j) Interference/Discrimination. (1) A contractor may not in any
manner interfere with an employee's accrual or use of paid sick
leave as required by Executive Order 13706 or 29 CFR part 13.
Interference includes, but is not limited to, miscalculating the
amount of paid sick leave an employee has accrued, denying or
unreasonably delaying a response to a proper request to use paid
sick leave, discouraging an employee from using paid sick leave,
reducing an employee's accrued paid sick leave by more than the
amount of such leave used, transferring an employee to work on non-
covered contracts to prevent the accrual or use of paid sick leave,
disclosing confidential information contained in certification or
other documentation provided to verify the need to use paid sick
leave, or making the use of paid sick leave contingent on the
employee's finding a replacement worker or the fulfillment of the
contractor's operational needs.
(2) A contractor may not discharge or in any other manner
discriminate against any employee for:
(i) Using, or attempting to use, paid sick leave as provided for
under Executive Order 13706 and 29 CFR part 13;
(ii) Filing any complaint, initiating any proceeding, or
otherwise asserting any right or claim under Executive Order 13706
and 29 CFR part 13;
(iii) Cooperating in any investigation or testifying in any
proceeding under Executive Order 13706 and 29 CFR part 13; or
(iv) Informing any other person about his or her rights under
Executive Order 13706 and 29 CFR part 13.
(k) Waiver. Employees cannot waive, nor may contractors induce
employees to waive, their rights under Executive Order 13706, 29 CFR
part 13, or this clause.
(l) Notice. The contractor must notify all employees performing
work on or in connection with a covered contract of the paid sick
leave requirements of Executive Order 13706, 29 CFR part 13, and
this clause by posting a notice provided by the Department of Labor
in a prominent and accessible place at the worksite so it may be
readily seen by employees. Contractors that customarily post notices
to employees electronically may post the notice electronically,
provided such electronic posting is displayed prominently on any Web
site that is maintained by the contractor, whether external or
internal, and customarily used for notices to employees about terms
and conditions of employment.
(m) Disputes concerning labor standards. Disputes related to the
application of Executive Order 13706 to this contract shall not be
subject to the general disputes clause of the contract. Such
disputes shall be resolved in accordance with the procedures of the
Department of Labor set forth in 29 CFR part 13. Disputes within the
meaning of this contract clause include disputes between the
contractor (or any of its subcontractors) and the contracting
agency, the U.S. Department of Labor, or the employees or their
representatives.
[FR Doc. 2016-22964 Filed 9-29-16; 8:45 am]
BILLING CODE 4510-27-P